Take a closer look at how TEAM reshapes bundled payment participation and accountability and how hospitals can respond strategically.
Our advisory team helps hospitals assess risk readiness and build TEAM-aligned care models before January 2026.
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Nearly 750 hospitals have been selected for mandatory participation in the CMS Transforming Episode Accountability Model (TEAM).
After years of testing voluntary bundled payment programs, selected hospitals must now participate in CMS TEAM starting January 1, 2026. The program will last five years and end December 31, 2030, and serve traditional Medicare beneficiaries. Hospitals that recently participated in the CJR Model or BPCI Advanced Model may also opt into CMS TEAM.
Complying with CMS TEAM presents a steep learning curve for many acute care hospitals, especially those without deep experience in value-based care, population attribution, or downstream cost management.
Even hospitals that participated in voluntary CMS bundled payment programs in the past will need to recalibrate their strategies to adapt to new performance standards.
According to CMS's website, TEAM aims to "improve the patient experience from surgery through recovery by supporting the coordination and transition of care between providers and promoting a successful recovery that can reduce avoidable hospital readmissions and emergency department use." CMS passed legislation in the FY 2025 Hospital IPPS Final Rule, approving the rollout of this new mandatory program despite opposition.
At the time of this writing, The American Hospital Association (AHA) strongly opposed CMS TEAM bundled payment model, arguing that it puts too much risk on providers with too little opportunity for reward through shared savings.
Participating hospitals must develop a strategy to understand the requirements and meet performance standards. Navigating and succeeding in the program's multiple risk track structure is attainable with the right tools.
The CMS TEAM model brings a new level of accountability through bundled payments to acute care hospitals for five types of surgical episodes:
1. Lower extremity joint replacement.
2. Surgical hip femur fracture treatment.
3. Spinal fusion.
4. Coronary artery bypass graft.
5. Major bowel procedures.
CMS will provide hospitals participating in TEAM with a target price representing typical and adjusted Medicare spending during an episode of care. The price includes the surgery (including the anchor hospital inpatient stay or outpatient procedure) and the procedures and services in the 30 days following discharge, such as SNF stays or provider follow-up visits.
CMS plans to incentivize participants to manage the total cost of care for the five specific surgical episodes, aiming to keep expenditures below the pre-determined target price.
Beyond cost management, any reconciliation payment is also significantly influenced by the quality of care provided, specifically readmissions, patient safety, and patient-reported outcomes. Participants must, therefore, not only control expenses but also ensure high-quality outcomes. Poor quality can lead to reduced payments or penalties, underscoring the need to balance financial efficiency and clinical excellence.
With high financial and operational stakes, CMS TEAM marks a pivotal moment in healthcare as hospitals brace for the program's start. Luckily, a one-year glide path offered to all participants will help ease hospitals into full risk.
Here's how the three participation tracks break down and what to do next.
Participants may begin with no downside risk for the first year (up to three years for safety net hospitals), meaning they can share in savings without incurring penalties for exceeding target costs. However, hospitals need a clear plan to help them achieve meaningful cost reduction and implement improvements that increase the quality of care they deliver.
Here's the challenge: Aggressively cutting costs might improve short-term reconciliation but could lead to burnout and lower future financial benchmarks, making sustained success harder. Conversely, without prioritized change, achieving initial savings may be difficult to achieve.
Striking the right balance starts with robust data analytics, expert guidance on pre-operative optimization, inpatient process improvement, and reduction of unwarranted clinical variation. Organizations also need tools that can assess current spending, forecast future costs, and pinpoint real opportunities to lower financial risk and achieve shared savings.
Hospitals that delay this investment may find themselves at a disadvantage.
"The top priority for track 1 participants should be building a strategic foundation to fully understand both your internal and CMS-provided data to create focus around clinical and operational changes that are achievable and impactful. With that in place, you’ll be able to navigate subsequent tracks with greater confidence and success." —Miriah Dahlquist, Population Health Management VP
Safety net, rural, and critical access hospitals must transition into track 2 by performance year (PY) 4. In this track, the stop-gain and stop-loss are capped symmetrically at 5%. Quality adjustments are from 10–15%, depending on the reconciliation outcome.
The bottom line? Hospitals that exceed target costs and underperform on quality measures will face penalties, while those that meet financial and quality targets can share in the savings.
Stop-loss and stop-gain are predefined caps on how much participating hospitals can profit or lose during the annual reconciliation process.
Hospitals in track 3 face greater risk and reward potential. Stop-gain and stop-loss limits are each 20% while the quality adjustment is up to 10%.
"CMS TEAM success depends on crafting the right strategy—and just as importantly, knowing which partners to align with to execute it effectively." —Dr. Gajan Srikanthan, Product Strategy, Medical Director
CMS TEAM hospitals will face direct competition from local peers, with cost efficiency determining their financial standing. From a cost standpoint, CMS compares a hospital's actual episode costs to a target cost that changes each year. These targets are based on claims data from regional hospitals and adjusted for beneficiary risk, demographics, Hierarchical Condition Categories (HCC) count, and conditions.
This dual focus on cost and quality is central to the model’s design.
If hospitals aren't building the right infrastructure now, they may struggle to keep pace with quality or cost demands later. Aligning physicians, optimizing perioperative workflows, managing post-discharge care, and integrating siloed data may seem overwhelming. Yet, they are all foundational pillars of a CMS TEAM strategy.
"CMS TEAM isn't just a compliance exercise. It's an opportunity to drive real value in surgical care through a coordinated care strategy, analytics, and shared provider accountability." —Dr. John Janas, Medical Director
With the implementation of CMS TEAM on the horizon, hospitals must act quickly and align people, data, and processes around clear outcomes. Here are five essential strategies to get started:
1. Data is Crucial: Success requires integrating clinical, financial, and claims data to identify likely bundle beneficiaries, understand leading and lagging performance indicators, add bundle costs, identify variation and opportunities, and track outcomes.
2. Post-Acute Care (PAC) Matters: Manage PAC utilization (such as clinically appropriate shifts from SNF/IRF to home health) as a significant driver of cost savings.
3. Coordination Is Key: Eliminate data and communication silos between hospitals, physicians, and PAC providers to open coordination channels. Create stratified outreach to patients post-discharge.
4. Physician Engagement Is a Must-Have: Align physicians through data transparency and incentives. This step serves as the motivation for practice change.
5. Operational Redesign Takes Priority: Don't skip opportunities to optimize workflows and standardize pathways, such as Enhanced Recovery After Surgery (ERAS).
With the right partner, hospitals can gain expertise and confidence to navigate CMS TEAM's complexity with clarity and control.
