Proposed MPFS rule cuts payments for orthopedic services

In July, CMS released its proposed rule for the Medicare Physician Fee Schedule (MPFS) for calendar year (CY) 2027.

For CY 2027, the agency proposed a payment update of -1.19% for clinicians in advanced payment models and -1.68% for all other clinicians. With a temporary 2.5% payment increase included in the One Big Beautiful Bill Act expiring at the end of the year and only modest payment updates to offset, physician payment rates will fall next year.

However, physicians providing orthopedic care could see more significant payment cuts due to other measures in the proposed rule.

According to CMS, changes to the MPFS' relative value units (RVU) would reduce aggregate allowed charges for orthopedic surgery by 7%, with a 5% reduction for orthopedic services in non-facility settings and an 8% reduction in facility settings.

CMS has also proposed substantial work-RVU reductions for several high-volume orthopedic procedures, including hip, knee, and shoulder surgeries. OrthoForum, an organization that represents independent orthopedic practices, warned that these changes could reduce physician reimbursement for total hip and knee replacement procedures by 20% in 2027.

Other proposed changes that could negatively impact orthopedic care include cuts to reimbursement for surgeries performed on the same day as evaluation and management visits and stricter requirements for the billing of remote patient monitoring services.

"This is not just a payment issue. It is a patient care issue," said Joel Mayerson, chair of the American Academy of Orthopaedic Surgeons' advocacy council. "The Proposed Rule undervalues the work required to diagnose, treat and manage complex musculoskeletal conditions, resulting in fewer physician options, longer wait times, and delayed access to care for Medicare beneficiaries. Clinical judgment must drive care decisions, not administrative policy that fails to account for what patients and surgeons face in the exam room and operating room."

CMS finalizes CJR-X, a new mandatory model

In late July, CMS finalized the Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment system rule for fiscal year (FY) 2027.

As part of the rule, CMS finalized a new mandatory joint replacement model called the Comprehensive Care for Joint Replacement Expanded (CJR-X) model. According to CMS, the initial CJR model, which ran from 2016 to 2024 in around 320 hospitals, generated around $112.7 million in net Medicare savings between 2021 and 2023. 

"[W]e are disappointed CMS failed to make meaningful improvements to its expanded joint replacement bundled payment program," said Joanna Hiatt Kim, VP of payment policy at AHA. the American Hospital Association. "Mandatory models present significant challenges, and CMS' low-volume threshold fails to ensure that hospitals have enough cases to integrate changes in care delivery and actually determine if they had an impact."

In addition, health experts say that CJR-X could accelerate the shift to ambulatory surgery centers for joint replacement procedures instead of inpatient or hospital outpatient settings. Under CJR-X, only inpatient and hospital outpatient procedures are included.

"This will also undoubtedly increase the outmigration of joint replacement to ambulatory surgery centers, which may be appropriate, but there will be increasing burden on the inpatient side to care for higher-acuity patients," said Sean Bak, an orthopedic surgeon at Motor City Orthopedics.

How TEAM can help prepare you for CJR-X

TEAM is a mandatory bundled payment model that focuses on five high-cost procedural episodes: hip and femur fractures, major bowel procedures, coronary artery bypass grafts, spinal fusion, and lower extremity joint replacements. The model, which went into effect Jan. 1, 2026, uses risk-adjusted benchmarks to evaluate total Medicare spending across a 30-day episode of care.

Hospitals that are participating in TEAM are excluded from participating in CJR-X. However, after TEAM ends, participants will automatically enroll in CJR-X on Jan. 1, 2031. Because CJR-X uses many of the same underlying mechanics as TEAM, hospitals can use the same strategies to prepare for both models.

In this expert insight, Optum Advisory's* Erik Johnson, Jennifer Leazzo, and Jennifer Puzziferro outline five ways hospitals can move beyond compliance with TEAM and turn it into a strategic advantage for long-term success:

1. View the payment model as a strategic opportunity rather than just a compliance exercise
2. Determine where your organization currently stands with risk
3. Focus on the full episode of care, not just discharge
4. Develop a strong post-acute network
5. Engage with frontline clinicians early on

According to Johnson, health systems that treat TEAM as "something they have to do rather than something that can learn and build upon" risk falling behind their peers. Instead of viewing TEAM and CJR-X as a regulatory checklist, health systems should use these payment models as a catalyst for broader system transformation, which will position them to better manage bundled payments and handle greater risk going forward.