Orthopedics

FY 2027 Orthopedic Changes:New MS-DRGs and the CJR-X Mandate

CMS finalized two changes that hit orthopedic service lines directly. Hip and knee procedures involving periprosthetic joint infection move into MS-DRGs 403 and 404 on October 1, 2026, and joint replacement bundles become mandatory nationwide from January 1, 2028.

  • Effective October 1, 2026
  • MS-DRG 403 and 404
  • CJR-X
  • CMS-1849-F
  • 91 FR 49570

Status: final•Updated September 2026•7 min read

ORTHOPEDICS MS-DRGs 403, 404 and the CJR-X Mandate What changes on October 1, and what lands in 2028. Effective Oct 1, 2026 Mandatory nationwide CMS-1849-F CJR-X COVERS Hip Knee Ankle MS-DRG 403 • 404 Periprosthetic joint infection
403 & 404

New MS-DRGs for hip and knee procedures involving periprosthetic joint infection

Oct 2026

The new groups take effect for discharges on or after October 1, 2026

Jan 2028

CJR-X begins as a mandatory nationwide joint replacement bundle

$725M

CMS savings estimate for CJR-X across five performance years

Both changes come from the FY 2027 IPPS final rule, CMS-1849-F, published on August 4, 2026 at 91 FR 49570. CJR-X covers hip, knee, and ankle replacements in inpatient and hospital outpatient settings, and participation is mandatory nationwide rather than selected by market.

This article covers the orthopedic provisions in detail. For everything else in the rule, see our FY 2027 IPPS Final Rule summary.

At a glance

Key facts

ItemDetail
New MS-DRGs403 and 404, hip and knee procedures involving periprosthetic joint infection
MS-DRG effective dateOctober 1, 2026
ModelCJR-X, Comprehensive Care for Joint Replacement Expanded
CJR-X scopeHip, knee, and ankle replacements, inpatient and hospital outpatient
CJR-X participationMandatory nationwide
CJR-X startJanuary 1, 2028
CMS savings estimate$725 million across five performance years
RuleCMS-1849-F, 91 FR 49570, issued July 31, 2026

Figures come from the CMS fact sheet and the Federal Register text. Code level assignments are in the Table 6P series on the CMS FY 2027 IPPS Final Rule Home Page.

Coding

Why did CMS create separate MS-DRGs for periprosthetic joint infection?

Periprosthetic joint infection cases consume substantially more resources than routine revision arthroplasty. Explantation, spacer placement, extended antibiotic therapy, staged reimplantation, and longer lengths of stay all sat inside what was previously a broader group. Separating these cases into MS-DRGs 403 and 404 lets payment track cost more closely.

The practical consequence is that classification now depends on documentation establishing periprosthetic joint infection as the condition driving the procedure. Where that documentation is thin, the case will group elsewhere, and the reimbursement difference will be material.

Three documentation elements that carry the MS-DRG assignment The infection identified as periprosthetic rather than a general surgical site infection, the relationship between the infection and the prosthesis including culture or synovial fluid findings, and the procedural intent to treat the infection. 1 The infection Identified as periprosthetic, not a general surgical site or soft tissue infection 2 The relationship Infection tied to the prosthesis, with culture or synovial fluid findings 3 The intent Whether the operation was performed to treat the infection or for another reason
Miss any one of the three and the case groups elsewhere, or becomes an audit target where it does not.

Relative weights for FY 2027 were recalibrated using FY 2025 MedPAR claims covering approximately 6.9 million discharges and FY 2024 Medicare cost report data. Pull the Table 6P files for the exact ICD-10-CM and ICD-10-PCS assignments before October 1.

Bundled payment

CJR-X, and what changed from the original model

CJR-X expands the Comprehensive Care for Joint Replacement Model, which CMS describes as having produced strong evidence of cost savings while maintaining quality of care. The original model ran from April 1, 2016 through December 31, 2024.

The original CJR model compared with CJR-X Participation moves from selected metropolitan statistical areas to mandatory nationwide, joints covered move from hip and knee to hip, knee and ankle, settings move from inpatient focused to inpatient and hospital outpatient, and the period moves from April 2016 through December 2024 to a start on January 1, 2028. ORIGINAL CJR CJR-X Participation Selected metro areas Mandatory nationwide Joints covered Hip and knee Hip, knee and ankle Settings Inpatient focused Inpatient and outpatient Period Apr 2016 to Dec 2024 Begins Jan 1, 2028
Four differences between the model that ended in 2024 and the one that starts in 2028.

Three of those differences matter operationally.

Geography no longer protects anyone

The original CJR carved out participation by metropolitan statistical area. CJR-X does not, so a hospital that sat outside the model for eight years is now inside it.

Ankle replacement is in scope

Volume is small at most facilities, but it now sits inside the episode definition and inside the target price.

The three joints covered by CJR-X CJR-X episodes cover hip replacement, knee replacement and ankle replacement, described collectively as lower extremity joint replacements. Hip Knee Ankle
Lower extremity joint replacement, as CJR-X defines it. Ankle is the addition.

The model follows the site of service

Episodes are triggered by procedures performed in inpatient and hospital outpatient settings. As joint replacement volume continues migrating outpatient, the model moves with it rather than creating an incentive to shift sites.

Hospitals already participating in the Transforming Episode Accountability Model should confirm how attribution resolves between the two. CMS finalized TEAM refinements in the same rule, including attribution and quality measurement methodologies aligned with other CMS programs.

Exposure

Where the denial risk sits

Two distinct exposures, arriving from different directions, landing on the same claim.

Two exposures that compound on one orthopedic claim DRG validation challenges the coding of the new infection groups, while level of care determinations challenge whether the case should have been an inpatient admission at all. A claim can survive one and be denied on the other. EXPOSURE ONE DRG validation Does the record support 403 or 404? EXPOSURE TWO Level of care Should this have been inpatient? ONE CLAIM Correct code, wrong setting Winning the coding argument does not win the claim
The interaction is the part most teams miss. The two exposures are assessed separately.

DRG validation on the new groups

Every MS-DRG split CMS makes becomes a payer and Recovery Audit Contractor focus, typically within one to two quarters of the effective date. Joint replacement is already among the most audited inpatient service lines. A new infection specific group gives auditors a concrete target: cases coded to 403 or 404 where documentation does not clearly establish periprosthetic infection, supporting culture results, or the relationship between the infection and the procedure performed.

Level of care determinations

This exposure grows from a different direction. Under the CY 2027 OPPS and ASC proposed rule, CMS proposes removing 637 procedures from the Inpatient Only list, the second set in a three year phase out. As orthopedic procedures leave that list, inpatient admission stops being automatically supported and the Two Midnight determination becomes the deciding factor.

That rule was still proposed as of September 2026, with a final rule expected around November 1, 2026. Confirm the final removal list before changing utilization review criteria.

Action plan

What orthopedic revenue cycle teams should do now

Orthopedic compliance calendar from October 2026 to January 2028 Load the Table 6P assignments before October 1, 2026, cross reference the Inpatient Only removal list when the CY 2027 OPPS final rule publishes around November 2026, track denials on the new groups through FY 2027, and model CJR-X episode economics before January 1, 2028. Before Oct 1, 2026 Load Table 6P codes Around Nov 1, 2026 OPPS final rule, confirm Inpatient Only removals Through FY 2027 Track 403 and 404 denials Before Jan 1, 2028 Model CJR-X economics
Four moves, in the order the deadlines arrive.

Before October 1, 2026

Load the Table 6P code assignments for MS-DRGs 403 and 404. Brief coders and clinical documentation integrity specialists on what documentation supports the new groups. Build a query template for periprosthetic joint infection that captures the infection, its relationship to the prosthesis, and the procedural intent.

During FY 2027

Track denial patterns on 403 and 404 separately from other arthroplasty DRGs. Segmented denial data is the only reliable signal that the documentation changes worked.

When the CY 2027 OPPS final rule publishes

Cross reference the confirmed Inpatient Only removal list against your orthopedic case mix and update utilization review criteria for the affected procedures.

Before January 1, 2028

Model CJR-X episode economics using current cost and post acute utilization data. Two years sounds like a long runway. It is not, because the historical data that sets target prices is being generated now.

Automation

Automating orthopedic DRG and authorization denials

Orthopedics absorbs both exposures described above at the same time, and neither comes with additional staffing.

DRG validation appeals

These follow a pattern. A payer challenges whether the documentation supports MS-DRG 403 or 404. Resolving it means locating the operative note, culture results, and infectious disease documentation, mapping them to the coding guideline at issue, and building the argument. That work is structured enough to automate. An autonomous agent can read the denial, retrieve the supporting record elements, cite the applicable ICD-10-CM Official Guidelines section or Coding Clinic guidance, and assemble the appeal package.

Authorization denials

In orthopedics these are mostly process failures: authorization obtained for a planned procedure that changed intraoperatively, authorization that expired before a rescheduled surgery date, or authorization never passed from the surgical scheduler to billing. An agent monitoring scheduling, clinical, and billing systems catches these before the claim goes out.

Level of care denials

These need the admission decision documented at the time it was made. As Inpatient Only removals expand, the Two Midnight justification has to be captured contemporaneously. Retrieving it after the denial arrives is far harder than recording it on admission.

Learn how our Autonomous RCM Agent works

FAQ

Frequently asked questions

What are MS-DRGs 403 and 404?

New MS-DRGs finalized in the FY 2027 IPPS final rule for hip and knee procedures involving periprosthetic joint infection. They take effect October 1, 2026.

When does CJR-X start, and is it mandatory?

January 1, 2028, and yes. CJR-X is mandatory nationwide, unlike the original CJR model which applied to selected metropolitan statistical areas.

Does CJR-X cover outpatient joint replacement?

Yes. It covers lower extremity joint replacements performed in both inpatient and hospital outpatient settings.

Which joints does CJR-X cover?

Hip, knee, and ankle replacements.

How much does CMS expect CJR-X to save?

$725 million across five performance years.

Where do I find the code assignments for the new orthopedic MS-DRGs?

The Table 6P series on the CMS FY 2027 IPPS Final Rule Home Page contains the ICD-10-CM and ICD-10-PCS codes for all MS-DRG changes.

What documentation supports MS-DRG 403 or 404?

Documentation should establish the infection as periprosthetic, its relationship to the prosthesis including culture or synovial fluid findings where available, and that the procedure was performed to treat the infection.

What is the FY 2027 IPPS payment update for orthopedic cases?

There is no orthopedic specific update. The general IPPS operating rate increases 2.3 percent for hospitals meeting quality reporting and electronic health record requirements. Case level payment changes come from the MS-DRG reclassification and relative weight recalibration, not the base update.

Are orthopedic procedures being removed from the Inpatient Only list?

The CY 2027 OPPS and ASC proposed rule, CMS-1850-P, proposes removing 637 procedures, the second set in a three year phase out. That rule was still proposed as of September 2026, with a final rule expected around November 1, 2026.

About the author

Written by Sadia Imran

Sadia Imran, Healthcare Marketing Expert

Sadia Imran has seven years of experience in life sciences content and communications, focused on Revenue Cycle Management. She writes on CMS payment rules, denial management, and healthcare finance operations, translating regulatory detail for clinical and financial audiences.

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Before October 1

New codes, new audit targets, same orthopedic team.

See how an autonomous RCM agent builds DRG validation and authorization appeals for arthroplasty denials, so the FY 2027 changes do not land on your headcount.