On August 28, as part of its Fiscal Year 2025 Hospital Inpatient Prospective Payment System (IPPS) Final Rule, the Centers for Medicare & Medicaid Services (CMS) finalized the Transforming Episode Accountability Model (TEAM) – a mandatory, episode-based alternative payment model applicable to certain acute care hospitals paid under the IPPS. TEAM seeks to incentivize care coordination, improve patient transitions, and decrease the risk of avoidable readmissions for beneficiaries who receive services covered under applicable episodes. The TEAM model will begin on January 1, 2026, and end on December 31, 2030.
More on IPPS and TEAM
The final rule includes a new Center for Medicare and Medicaid Innovation (CMMI) payment model, Transforming Episode Accountability Model (TEAM), that would encompass Part B drugs and biologics and be mandatory for selected acute care hospitals. CMS states that TEAM advances CMMI’s prior work on episode-based alternative payment models, including the Bundled Payments for Care Improvement Advanced and Comprehensive Care for Joint Replacement models.
TEAM participation will be mandatory for all acute care hospitals paid under the IPPS that are located within 188 randomly-selected geographic areas, called core-based statistical areas (CBSAs). The selected CBSAs span nearly all 50 states, except Maryland; hospitals in Maryland are excluded due to their participation in the ongoing Maryland Total Cost of Care Model. In order to encourage cross-disciplinary collaboration between TEAM-participating hospitals and participants in CMS’s accountable care organization initiatives, the TEAM Model will allow for provider and individual overlap with other CMS models and initiatives.
For example, hospitals currently participating in the Bundled Payments for Care Improvement Advanced (BPCI-A) or the Comprehensive Care for Joint Replacement Model (CJR) but that are not in a TEAM CBSA will be provided a one-time opportunity to voluntarily opt into TEAM while continuing participation in BPCI-A or CRJ. In addition, CMS plans to address in future rulemaking whether hospitals already participating in other value-based contracting models will be required to participate in TEAM.
Participating hospitals will assume risk for episodes of care triggered by one of the following “anchor procedures”: lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure. Episodes will generally begin upon admission to the hospital for the anchor procedure and continue until 30 days after the beneficiary is discharged. In order to support continuity of care, help manage underlying chronic conditions, and promote positive long-term outcomes, participating hospitals will be required to refer the beneficiary to a primary care provider upon discharge.
CMS will pay participating hospitals a “target price” comprised of most Medicare Parts A and B spending associated with an anchor procedure during an episode. The target price will include the relevant surgery, associated inpatient stay, post-acute care, follow-up visits, and other relevant items and services following discharge. Target prices will be risk-adjusted based on patient-level risk factors, including “social risk” and will be rebased annually.
CMS will reconcile payments and assess participant performance on an annual basis. Depending on the outcome of that assessment, participants may either earn a positive performance payment or owe CMS a repayment amount. The amount of any payment or repayment will depend on a participant’s participation track and how the participant’s total Medicare costs for the episode compare to the target price.
Additionally, the TEAM model includes three “tracks,” each with differing financial risk and quality performance adjustments. In Track 1, hospitals will not bear risk for shared losses, and their potential shared savings will be capped by a 10% “stop-gain limit.” Generally, participants who begin in Track 1 will automatically shift to Track 3 in performance year (PY) 2 and remain in Track 3 for the remainder of the model.
Participants who select Track 2 will be subject to 5% limits on gains and losses. This is lower than CMS’s initial proposal of a 10% limit. In consideration of the lower level of risk inherent in this track, CMS is limiting Track 2 eligibility to safety net hospitals, rural hospitals, Medicare Dependent Hospitals, sole community hospitals, and essential access community hospitals.
Those in Track 3 will take a higher degree of financial risk, with 20% limits on gains and losses during each PY. The proposed rule contained a “low-volume threshold” exception, which would have reduced financial risk on hospitals with less than 31 total episodes during a baseline period by placing them in Track 2 (regardless of their selected track). However, CMS declined to adopt this “low-volume threshold” concept in the final rule. Instead, CMS signaled that it may engage in additional rulemaking to address the level of risk “low volume” participants may face.