The federal agency that oversees Medicare is moving to place ASCs inside the same episode-based payment framework that has governed hospital joint replacement care since 2016, and ASC operators have roughly 18 months to figure out what that means for their business.
Two interconnected proposals in CMS’s fiscal year 2027 Hospital Inpatient Prospective Payment System proposed rule, released April 10, set the stage for the most significant shift in orthopedic and spine ASC payment policy in years.
What CMS proposed
The headline item is CJR-X, the proposed Comprehensive Care for Joint Replacement Expanded model. CJR-X would be mandatory nationwide and begin October 1, 2027, covering lower extremity joint replacement surgeries, including hip, knee and ankle replacements, performed in both inpatient and outpatient hospital settings. If finalized, more than 2,500 hospitals would face bundled payment rules starting that date, making it the first time CMS has made an episode-based payment program both mandatory and nationwide.
Under the proposal, participating hospitals would be held accountable for the cost and quality of lower extremity joint replacement episodes starting with the procedure and extending 90 days after discharge. The original CJR model, which ended December 31, 2024 after running in 34 metropolitan statistical areas, produced an estimated $112.7 million in net savings while maintaining quality of care.
ASCs are explicitly excluded from CJR-X as direct participants. Acute care hospitals are the formal participants and are financially accountable for the episode. But the exclusion from direct participation does not mean ASCs are insulated from the model’s effects.
Separately, buried deeper in the same proposed rule, CMS issued a request for information asking stakeholders whether ASCs should be incorporated into TEAM — the Transforming Episode Accountability Model, the mandatory five-year surgical episode program that launched January 1. CMS is exploring ASC incorporation into TEAM and requesting feedback on model design, financial accountability, episode construction and quality measurement, while noting that any expansion would require appropriate guardrails to address risks related to utilization, patient selection and program integrity. The comment period on the proposed rule closed June 9.
Why ASC operators should care
The orthopedic ASC business model is built on volume, efficiency and payer mix. CJR-X rewires the incentive structure around all three. They show up in the ASC where the surgery happens and in the post-acute setting where the patient recovers. When hospitals are on the hook for total episode spending, they become intensely focused on which surgical sites, post-acute partners and referring physicians they send patients to. An orthopedic ASC that cannot demonstrate low complication rates, tight readmission records and clean outcomes data becomes a liability in a hospital partner’s CJR-X calculus regardless of how competitive its cost structure is today.
The TEAM RFI makes the longer-term trajectory explicit. CMS has signaled it views ASC inclusion as a question of when, not whether. The RFI asks specifically about how episode accountability, financial risk and quality measurement would work in the ASC context.
What the timeline looks like
The FY 2027 IPPS final rule is expected in late 2026. CJR-X would launch October 1, 2027, beginning the first of five proposed performance years, with the model running through September 30, 2032. The TEAM RFI response period has closed, but the feedback CMS received will shape whether and how ASCs are formally pulled into the model before TEAM’s 2030 expiration.
The Ambulatory Surgery Center Association filed comments June 9 with CMS pushing back against potential inclusion of ASCs in the TEAM, arguing the program is poorly structured for the ASC setting and could slow the migration of high-value procedures out of hospitals .ASCA also raised concerns about what mandatory episode-based payment could do to procedure migration. ASCs currently perform more than 42,000 total knee replacements and more than 24,000 total hip replacements annually. KNG Health Consulting found that ASC performance of total knee replacements alone saved Medicare $624 million from 2020 to 2024, with projections suggesting $2.8 billion in savings over the next 10 years. ASCA warned that forcing ASCs into TEAM could prompt some centers to drop Medicare joint replacement lines rather than assume episode accountability, pushing procedures back into higher-cost hospital settings.
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