If your hospital is among those selected by CMS, participation in the CMS TEAM Model becomes mandatory beginning January 1, 2026. The Transforming Episode Accountability Model holds acute care hospitals accountable for the total cost and quality of care delivered during specific surgical episodes, including the procedure and 30 days after that. This introduces a broader level of financial and clinical accountability that unprepared hospitals may struggle to manage.
The year 2026 is critical because it establishes the foundation for performance under the model. The workflows, care coordination processes, and data systems hospitals establish early will influence financial outcomes through 2030. This is not just a compliance requirement but a structural change in how Medicare reimburses care, and those organizations that treat it as a strategic opportunity will win out.
What is the CMS TEAM Model, Exactly?
The CMS TEAM Model is a mandatory episode-based payment model introduced by the Centers for Medicare & Medicaid Services as part of the FY 2025 Hospital Inpatient Prospective Payment Systems (IPPS) rule. It runs from January 1, 2026, through December 31, 2030.
Here’s the core idea: CMS sets a target price for each episode of care. Hospitals that keep episode spending below the target price may receive reconciliation payments. Hospitals that exceed the target price may owe repayments to CMS. Financial results are adjusted based on quality performance. This ensures that reducing costs at the expense of care quality does not produce financial gain.
Which Procedures Are Covered?
The model covers high-volume surgical episodes, including:
- Lower Extremity Joint Replacement (LEJR)
- Surgical Hip/Femur Fracture Treatment (SHFFT)
- Spinal Fusion
- Coronary Artery Bypass Graft (CABG)
- Major Bowel Procedures
Each episode begins at the triggering procedure and runs through 30 days post-discharge, capturing all Medicare-covered services across every care setting.
Who Has to Participate?
Participation is limited to acute care hospitals paid under the Inpatient Prospective Payment System (IPPS). CMS uses stratified random sampling to select roughly a quarter of eligible Core Based Statistical Areas (CBSAs). If your hospital is located in a selected CBSA, participation is mandatory, and there is no opt-out.
CMS has already published a list of eligible hospitals. If you haven’t confirmed your status, that’s step one.
How Are Target Prices Set?
This is where the model becomes more detailed and where understanding the mechanics can actually protect your margins.
Target prices are calculated at two levels:
- Regional level: Based on three years of historical spending data for each MS-DRG or HCPCS code within your U.S. Census Division, trended forward for inflation.
- Hospital level: Adjusted to reflect patient mix, hospital size, and safety net status to prevent hospitals that treat more complex or vulnerable populations from being unfairly penalized.
On top of that, quality-adjusted discount factors apply:
- 1.5% discount for CABG and Major Bowel Procedure episodes
- 2.0% discount for LEJR, SHFFT, and Spinal Fusion episodes
Final reconciliation amounts are then modified by your Composite Quality Score (CQS), meaning quality performance directly moves the financial needle.
What Quality Measures Are Tied to Financial Outcomes?
The TEAM Model CMS uses a Composite Quality Score (CQS), a framework similar to the quality scoring used in Bundled Payments for Care Improvement Advanced, to link quality performance to payment. The measures include:
- Hybrid All-Cause Readmission Measure
- CMS Patient Safety Indicator 90 (PSI-90)
- LEJR Patient-Reported Outcome-Based Performance Measure
- Hospital Harm and Failure to Rescue Measures (starting in Performance Year 2)
A strong CQS increases your financial reconciliation. A weak one reduces it. This design means quality improvement and cost management must operate together, but they constitute the same work stream.
What Does Care Coordination Look Like Under TEAM?
The model creates new operational responsibilities for care teams. Before discharge, hospitals are required to:
- Provide a referral to a primary care provider for every beneficiary
- Screen patients for health-related social needs such as food insecurity, housing instability, transportation challenges, and utility needs
- Track follow-up rates for both PCP visits within 14 days and specialist visits within 30 days
Beyond compliance, this is also where the biggest cost savings live. Readmissions, unnecessary SNF stays, and post-acute care leakage are the primary cost drivers in most TEAM episodes. Organisations that get proactive about discharge planning and post-acute transitions will see the financial benefit directly.
The Post-Acute Care Problem and Why It Matters Most
A large portion of episode spending occurs during the post acute care period, known as post-acute care (PAC). Skilled nursing facilities, home health agencies, and inpatient rehab are all big cost centres, and CMS is paying attention to the direction of this expenditure.
Key areas to monitor under TEAM:
- PAC spend per episode: how much is going to each setting
- PAC leakage: patients going to lower-value or out-of-network PAC providers
- SNF length of stay: longer stays increase episode cost without proportional quality benefit
- Readmission rates: Every readmission adds to your episode total
Organizations without real-time visibility into these metrics may struggle to manage episode costs effectively.
How Hospitals Should Prepare Right Now
The model is live. If your organization hasn’t started, here’s what needs to happen immediately:
- Assess current TEAM episode performance: where are costs running high?
- Map your post-acute care network to determine which partners deliver strong outcomes at a reasonable cost.
- Implement screening workflows for health-related social needs, as this is mandatory, and it takes time to operationalize
- Establish care coordination protocols, especially around discharge planning and transitional care.
- Implement systems that track episode cost, quality metrics, and post acute utilization.
The first year sets the baseline. Whatever performance data CMS captures in 2026 shapes expectations going forward. Starting strong matters.
Wrap Up
The CMS TEAM Model represents a significant shift in Medicare payment policy. Hospitals that proactively manage episode costs and care coordination will perform better under the model before CMS reconciliation results are finalized. Persivia CareSpace® provides analytics dashboards, predictive discharge modeling, and point-of-care quality insights that support episode management. Reported implementations have shown improvements such as reduced readmissions and lower post-acute spending.
FAQs About the CMS TEAM Model
What is the CMS TEAM Model?
The CMS Transforming Episode Accountability Model (TEAM) is a mandatory episode-based payment model introduced by the Centers for Medicare & Medicaid Services (CMS). It holds selected acute care hospitals financially accountable for the total cost and quality of care for specific surgical episodes, including the procedure and the 30 days following hospital discharge.
When does the CMS TEAM Model start and how long will it run?
The CMS TEAM Model begins on January 1, 2026, and will run through December 31, 2030. During this five-year period, hospitals must manage episode spending and quality performance to meet CMS benchmarks and avoid financial penalties.
Which procedures are included in the TEAM Model?
The TEAM Model focuses on several high-volume surgical procedures, including:
- Lower Extremity Joint Replacement (LEJR)
- Surgical Hip/Femur Fracture Treatment (SHFFT)
- Spinal Fusion
- Coronary Artery Bypass Graft (CABG)
- Major Bowel Procedures
Each episode includes the surgery and 30 days of post-discharge care across all healthcare settings.
Is participation in the CMS TEAM Model mandatory?
Yes, participation is mandatory for selected hospitals. CMS uses stratified random sampling of Core Based Statistical Areas (CBSAs) to choose participating hospitals. If a hospital is located in a selected area and operates under the Inpatient Prospective Payment System (IPPS), it must participate in the model.
How can hospitals succeed under the CMS TEAM Model?
Hospitals can perform well under the TEAM Model by focusing on strong care coordination, post-acute care management, and quality improvement. Key strategies include reducing unnecessary readmissions, managing skilled nursing facility stays, improving discharge planning, and closely tracking episode spending and quality metrics.