Exploring TEAM: Bundled payments, updates and how to prepare
CMS' next value-based care step is the Transforming Episode Accountability Model, or TEAM, requiring some hospitals to participate in the risk-based bundled payments model.
The shift to value-based care is about to get a big push. CMS is launching a new bundled payment model called the Transforming Episode Accountability Model, or TEAM, that will require hospital participation in select areas, creating a new type of reimbursement structure for many procedures.
However, some hospitals have expressed concerns about the model, particularly its mandatory nature and the levels of financial risk required. Many hospitals have also waited to see how the Trump Administration, which has sought major changes to how the healthcare system and its payments work, would support the model.
But the Trump Administration has doubled down on TEAM, meaning hospitals now have less than six months to prepare for model participation.
What is the Transforming Episode Accountability Model (TEAM)?
The Transforming Episode Accountability Model is a mandatory, five-year bundled payment model starting on Jan. 1, 2026. Hospitals in the selected core-based statistical areas tapped by CMS to participate in TEAM will be held accountable for the care quality and costs of Traditional Medicare beneficiaries undergoing certain procedures and for the first 30 days after beneficiaries leave the hospital.
The procedures included in the model will be lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft and major bowel procedure.
CMS will provide participating hospitals with a target price for the procedures, which represent most Medicare spending during that episode of care, including the surgery, skilled nursing facility stays and/or provider follow-up visits. Hospitals must stay within this target price and hit quality metrics or owe CMS for the episode of care.
TEAM incorporates downside financial risk through three tracks. Track 1 will have no downside risk, but lower levels of reward, while Track 2 will have some level of downside risk, but still include lower levels of rewards compared to Track 3. In Track 3, participants face higher levels of downside risk and rewards.
CMS will enable a glide path for the first year of participation so hospitals can ease into downside risk. Safety-net hospitals will also be able to stay in Track 1 for up to three years.
Through risk-based bundled payments, CMS intends to incentivize care coordination and eliminate fragmented care driven by the fee-for-service payment system. The agency also intends for TEAM to motivate enhanced care transitions, investment in healthcare infrastructure and higher value care.
Recent updates to TEAM
In the recently released fiscal year (FY) 2026 Hospital Inpatient Prospective Payment System (IPPS) final rule, CMS included slight changes to TEAM. Notably, these changes do not fundamentally alter how TEAM will operate.
Updates to target price constructions to account for Medicare Severity Diagnosis-Related Group or Healthcare Common Procedure Coding System code modifications to ensure anchor hospitalizations and procedures remain consistent.
Expansion of the waiver that allows Medicare beneficiaries to bypass the three-day hospital stay requirement before being admitted to a skilled nursing facility.
Limited deferment period for certain hospitals, including those recently acquired by another hospital, for at least one performance year.
Transition policy for participants deemed Medicare-Dependent Hospitals, a designation set to expire.
Removal of the Decarbonization and Resilience Initiative, as well as requirements for voluntary health equity plan submission and health-related social needs data reporting.
Preparing for TEAM participation
TEAM is not an option for many U.S. hospitals, yet many eligible facilities have yet to prepare for looming participation requirements.
"You're just beginning to see hospitals say, 'This is something that we better start paying attention to,' whereas in the first six months of the year, many said, 'Let's wait and see what happens,'" said David Shulkin, M.D., chief innovation office at Sanford Health and former Secretary of the Department of Veterans Affairs. "They've now recognized that if they wait much longer, they're not going to be prepared, but the January deadline is coming whether they like it or not."
Many hospitals will have to catch up on TEAM, even though many are likely to default to the lowest level of financial risk the first year. Shulkin suggested that these hospitals start with a gap analysis to determine where they might need new solutions or workflows. Data access is likely to be a major gap, he added.
"Hospitals tend to be very blind with data systems, meaning they don't have the ability to track the patient the way they would if they were inside the walls of their hospital," Shulkin explained. "That's where many hospitals are beginning to recognize that they need additional help. They need the ability to manage these patients in a different way than they have in the past. They need the ability to track the data in a way they have not in the past."
As part of the gap analysis, hospitals will need to identify solutions to bridge gaps, like data access. However, hospitals will likely have to look to third-party partners to implement solutions at this point.
"Generally, at this point, building new solutions internally is going to be challenging because of the resource commitments, but also the timeliness," Shulkin stated. "Look for companies that can help you do that if you have those gaps in your data visibility because managing this without having visibility into what's happening to the patient is going to put people significantly behind, even at the beginning. So, that is one of the things I'd look at as soon as possible for most of these hospitals."
Shulkin also advised hospitals to determine the best clinical practices and align them with operational and financial efficiencies. "Successful efforts in TEAM are going to be multifaceted," he stressed.
Moving the value-based care needle
Some hospital leaders may feel that mandatory participation in TEAM is a punishment. However, Shulkin states that it is a meaningful step toward value-based care.
"TEAM is a push to involve the broader healthcare ecosystem as opposed to those raising their hand to volunteer to be part of a pilot for a new reimbursement model," he elaborated. "This indicates that CMS is serious about moving in this direction, and they're going to bring the industry along with them."
TEAM is a push to involve the broader healthcare ecosystem as opposed to those raising their hand to volunteer to be part of a pilot for a new reimbursement model.
David Shulkin, M.D., chief innovation office, Sanford Health
After all, CMS aims to have all Traditional Medicare beneficiaries in an accountable care relationship by 2030. However, only about a third of Medicare payments are part of a downside risk contract, according to the latest measurement effort from the Health Care Payment Learning & Action Network.
"TEAM will force some hospitals that may not have necessarily done it on their own to start looking internally at how they're prepared not only for this model, but how they're prepared for a changing reimbursement system," Shulkin said.
Fortunately, Shulkin also believes TEAM is flexible enough for hospitals to find their way to success. Despite mandatory participation, hospitals of all shapes and sizes will determine best practices and share those through the model.
"You begin to see what's working and what's not," he stated. "Then, hospital leadership across the country will start talking about it, which is a way of accelerating this movement towards value-based care."
Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.
