Mandatory TEAM Bundled Payment Model: It’s Not Just for Hospitals

The new Transforming Episodic Accountability Model (TEAM) is required for hospitals in 188 selected regions across the country. It’s the first mandatory payment model from the Centers for Medicare & Medicaid Services (CMS) in many years.

While hospitals are mandated to participate and held accountable for episode spending, TEAM also presents important opportunities or liabilities for other health care providers in those same regions.

TEAM participant hospitals, collaborators

Value-based care models — think Accountable Care Organizations (ACOs) — have been growing over the years, but most of those have been voluntary. TEAM is one of only a few models mandated to date. The other well-known mandatory model is the Comprehensive Care for Joint Replacement (CJR), on which TEAM is partially based. Plus, TEAM uses lessons learned from the voluntary Bundled Payments for Care Improvement (BPCI Advanced) model.

CMS finalized the TEAM model as part of the 2025 inpatient prospective payment system (IPPS) rule. The rule requires certain TEAM “participants” in 188 selected geographic regions (Core Base Statistical Areas, CBSAs) to participate. TEAM participants are defined as acute care hospitals that initiate episodes and are paid under the IPPS with a CMS Certification Number primary address located in one of the geographic areas selected for participation. It’s important to note rural hospitals are included in this model. Under the mandatory CJR model, rural and low-volume hospitals were exempted. That is not the case with TEAM.

While episodes are triggered only by TEAM participant hospitals, the model includes many others as potential “collaborators.” These are Medicare-enrolled individuals or entities and ACOs in a sharing arrangement. See examples at right.

TEAM surgical episodes

TEAM is a five-year model starting January 1, 2026, through December 31, 2030. Hospitals will be held financially accountable for the cost and care for five surgical episode categories:

• LEJR, lower extremity joint replacements (knees, ankles, hips)
• SHFFT, surgical hip and femur fracture treatment
• CABG, coronary artery bypass graft
• Spinal fusion
• Major bowel

Hospitals are not able to select a specific surgical category; all five are applicable to TEAM participants. An episode triggers from an anchor hospitalization or anchor procedure and lasts 30 days post anchor event or discharge.

TEAM risk tracks 

There are three tracks for TEAM participants with increasing levels of financial risk/reward. 

• Track 1 is available only in performance year (PY) 1 for all TEAM participants. It’s upside financial risk only with quality adjustments applied to positive reconciliation amounts. CMS will only allow TEAM participants to participate in Track 1 for one year, specifically PY 1, unless they are safety net hospitals. The latter hospitals may remain in Track 1 through PY 3.
• Track 2 is available in PYs 2 through 5 to a limited set of TEAM participants. CMS allows certain TEAM participants — safety net and rural hospitals — to elect to participate in Track 2 beginning in PY 2 and stay in Track 2 for the remainder of the model (PYs 2 through 5). Track 2 requires some level of both upside and downside risk.
• Track 3 is available in PYs 1 through 5 for all TEAM Participants. Track 3 includes higher levels of two-sided financial risk.

How target prices are set, other providers implicated

As an episode-based model, TEAM participant hospitals are held accountable for the cost and quality of the episodes they initiate and for downstream costs up to 30 days afterwards — this covers almost all Part A and Part B payments, including physicians, therapists, and post-acute care.

Target prices are based on three prior years of regional spending data, normalized and trended forward to the PY. There will be risk adjustments for beneficiary-level variables (age group, clinical complexity, social risk) and hospital characteristic. Like various other payment models, CMS will include a discount factor upfront, as an automatic way to provide savings to Medicare. The final reconciliation payment will depend on the track, the composite quality score, and the overall spending compared to the target price. 

This is why participant hospitals will want to have ongoing, collaborative relationships — including potential gainsharing (upside) and alignment payments (downside) — with other downstream providers like physicians, nursing homes, home health, or therapy providers. It also means hospitals will focus on cost efficiency and high-quality care. 

Another reason to look at higher quality providers relates to waiver flexibility. As with other payment models, several waivers are allowed, such as waiving the three-day inpatient stay requirement before a skilled nursing facility (SNF) admission. A hospital can leverage this waiver with SNFs, but only if the SNF is a three star or above.

For TEAM collaborators, partnering with these hospitals provides the potential to keep or improve referral networks, benefit from gainsharing arrangements, and potentially have access to participating hospitals’ data analytics or technology.

How CLA can help with TEAM implementation

While 2026 seems a long time away, it’s not. For hospitals, it will take time to understand the TEAM model, analyze your claims, prepare your teams, and establish downstream collaborations. For other health care providers, it will also take time to understand the role you could play in the model, review your referral relationships, improve or maintain your star ratings, and determine whether to take advantage of this opportunity or risk being bypassed.

CLA can help. We can advise on model details, help you understand if you’re required to participate or if hospitals in your regions are required to participate, analyze your referrals relationships, provide financial insights, and more. 

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