CMS Finalizes 2.3% Hospital Pay Bump and Joint Replacement Model

CMS on July 31 finalized its Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System rule for fiscal 2027, according to Becker's Hospital Review. The rule sets a 2.3% payment increase for acute care and long-term care hospitals.

The bigger shift is structural. CMS locked in its first mandatory, nationwide episode-based payment model for joint replacements, covering knee, hip, and ankle procedures. Unlike prior voluntary bundled payment experiments, this model applies across the country, making hospitals accountable for the total cost and quality of care across an entire episode rather than each individual service.

For hospitals, that means financial exposure to complications, readmissions, and post-acute spending they previously did not directly own. The move signals CMS is done piloting value-based orthopedic care and is ready to enforce it broadly. Health systems will need to tighten coordination with surgeons, rehab providers, and post-acute partners, and lean on data and analytics to manage cost per episode as the model takes effect.