Plan for Launch of TEAM Bundled Payment Model

Nursing homes, hospitals, hospices receive positive payment updates Hospitals should be in the planning stages for the forthcoming launch of the Transforming Episodic Accountability Model (TEAM) — a mandatory bundled payment model first finalized last year. A recent proposed rule makes a few modifications but continues the scheduled roll-out of TEAM on January 1, 2026. As a bundled payment model, there are important considerations for hospitals, nursing homes, physicians, rehab providers, and others.

These TEAM model modifications were included under the recently released proposed 2026 fiscal year (FY) inpatient prospective payment system (IPPS) rule. The Centers for Medicare & Medicaid Services (CMS) also released the proposed 2026 rules for skilled nursing facility (SNF) and hospice providers on that same day.

Here’s your quick look at these three proposed rules.

Hospitals — Proposed FY 2026 Inpatient Prospective Payment System Rule

Payment, wage index updates

Hospitals would see a proposed market basket increase of 2.4% — the result of a 3.2% update minus the required productivity adjustment of negative 0.8%. With respect to wage index changes, the labor-related share is reduced to 66%, 1.6% down from the current year 67.6%.

Due to losing a court case, CMS will discontinue its low-wage index policy now and for all future years.

DSH payment

The Medicare disproportionate share hospital (DSH) payment formula includes three factors. CMS proposes Factor 1 is $11.76 billion, Factor 2 is 60.71% and $7.14 billion, plus Factor 3 will be the three most recent years (FY 2020, FY 2021, FY 2022) of audited cost report worksheet S-10. The result of this formula is a proposed uncompensated care pool $1.5 billion higher than it was in 2025.

TEAM bundled payment model

Of note in this year’s proposed rule is that CMS will continue the scheduled launch of the TEAM model in 2026 with a few modifications. TEAM was finalized in the 2025 final IPPS rule and is mandatory for about 750 hospitals in certain geographies across the country. Hospitals are held responsible for cost and quality of care for five categories of major surgeries. An episode includes the surgery and 30 days post-acute.

The proposed modifications include:

• Expanding the SNF three-day-stay rule to include rural PPS and critical access hospitals with swing beds
• Changing the risk adjustment look-back period to 180 days and using the community deprivation index instead of the area deprivation index
• Reconstructing the normalization factor
• Removing health equity plans, health related social needs data, and the decarbonization and resilience initiative

Skilled Nursing Facilities — Proposed FY 2026 Prospective Payment System Rule

Payment updates

SNFs would see a net payment increase of 2.8% — the result of a 3% update increased by 0.6% due to a previous forecasting error then reduced by the mandatory 0.8% productivity adjustment.

VBP and QRP program updates

The proposed rule alters the SNF Value-Based Purchasing (SNF VBP) program in several ways:

• Removing the health equity adjustment
• Applying SNF VBP scoring methodology to the SNF within-stay potentially preventable readmission measure
• Adopting a new reconsideration process to appeal CMS’s decisions on review and correction requests

For the SNF quality reporting program (QRP), CMS proposes removing four standardized patient assessment data elements under the social determinants of health (SDOH) category beginning with residents admitted on October 1, 2025, for the FY 2027 SNF QRP. The items are one item for Living Situation, two items for Food, and one item for Utilities. CMS also proposes several changes to the SNF reconsideration policy and process.

Hospices — Proposed FY 2026 wage index and rate update

Payment updates

Hospices would receive a proposed payment update of 2.4%. The proposal also adjusts the hospice cap amount for FY 2026 cap year to $35,292.51. This is calculated by taking the FY 2025 cap amount ($34,465.34) and updating it with the proposed 2026 update of 2.4%.

Policy updates

In addition, CMS aligns hospice admission language to current payment and conditions of participation — adding “or the physician member of the hospice interdisciplinary group” may also determine admission to hospice care. These individuals are in addition to the medical director or physician designee.

There are clarifications on face-to-face attestation requirements and CMS reiterates its intention of implementing the HOPE assessment tool — Hospice Outcomes and Patient Evaluation — in FY 2026 (October 1, 2025).

How CLA can help

Each proposed rule has payment changes of interest. Plus, the TEAM model will impact a broader cross-section of health care than just hospitals. While hospitals should be preparing for TEAM, the role of physicians and post-acute providers will be important to success. If you have questions on the SNF rule, hospice rule, or the TEAM model, reach out on how our HCLS teams can help you.