The Transforming Episode Accountability Model: Will the Whole “Team” Buy In?

What is TEAM?

On January 1, 2026, the Centers for Medicare and Medicaid Services (“CMS”) launched their new episode-based, longitudinal, post-acute care initiative called the “Transforming Episode Accountability Model,” or TEAM. The goal of TEAM is to improve health outcomes through investment in improving care transitions after people are discharged from inpatient admission or undergo outpatient surgeries/procedures. Participation is mandatory for certain acute-care hospitals in designated Core-Based Statistical Areas (“CBSAs”) across the U.S.; the final participant list was published by CMS in the FY 2025 Inpatient Prospective Payment System (“IPPS”) final rule. Currently, only patients with Original Medicare will be included in TEAM.

TEAM is scheduled to run for five years, beginning on January 1, 2026, and ending on December 31, 2030. Participating hospitals choose one of three “tracks” with varying degrees of risk and reward based on yearly performance; each of the five years is known as a “Performance Year.”[1] CMS has created five distinct surgical “episodes,” or categories, of inpatient and/or outpatient surgical procedures that define TEAM. Episodes involve either IPPS “anchor hospitalizations” and their associated Medicare Severity-Major Diagnostic Groups (“MS-DRGs”) or Outpatient Prospective Payment System (“OPPS”) “anchor procedures” and their associated Healthcare Common Procedure Coding System (“HCPCS”) codes[2]. These episodes include the following:

Coronary Artery Bypass Graft (CABG) – Inpatient
Major Bowel Procedure – Inpatient
Lower Extremity Joint Replacement (LEJR) – Inpatient/Outpatient
Surgical Hip and Femur Fracture Treatment (SHFFT) – Inpatient
Spinal Fusion – Inpatient/Outpatient

Using historical data, CMS created a “target” price for each of the included episodes for Performance Year 1. These target prices include “…all non-excluded Medicare Parts A & B items and services included in an episode,”[3] with certain exceptions, including oncology or transplant hospital admissions, new technology add-on payments, and high-cost drugs.[4] Target payments will also be risk-adjusted using various beneficiary and hospital factors. Under TEAM, an episode length is also known as the “post-discharge period” and specifically defined as starting, “…on the day the anchor hospitalization/anchor procedure ends and is 30 days long. It encompasses all the relevant spending incurred for that beneficiary during that period.”[5]

Impact of TEAM

The last sentence above, “…It encompasses all the relevant spending incurred for that beneficiary during that period…”, creates many questions and opportunities for further discussion. TEAM participants continue billing Medicare fee-for-service (“FFS”), even for patient claims that meet TEAM inclusion criteria. Participants will also receive their risk-adjusted target payments in advance of each Performance Year, with each advance payment being based on data from the three most recent prior years. CMS will then determine individual participant performance by comparing the participant’s Medicare FFS spending for each of the specific episodes to the target payment for the same episode. After completing this process, the participant may qualify for a “Reconciliation Payment,”[6] where CMS awards additional reimbursement based on positive TEAM performance, or be subject to a “Repayment Amount,”[7] where the participant owes CMS additional money due to poor TEAM performance in the previous Performance Year.

TEAM is designed as a longitudinal, whole-episode model, attempting to incentivize participants to coordinate with downstream collaborators such as primary care providers, skilled nursing care providers, etc. However, CMS has specifically designed TEAM to hold only the participant, or the acute-care hospital, accountable for both the patient outcomes and costs associated with each episode of care. So, what incentive do those downstream collaborators have in ensuring both positive outcomes and that the care remains within the expected target prices? How do we get the patient’s entire healthcare provider “team” to buy into this process?

According to CMS, one such incentive is that TEAM participants and downstream collaborators may enter into “sharing arrangements” that allow for participants to make “gainsharing payments and/or receive alignment payments.”[8] Upon reading the previous sentence, compliance and legal professionals immediately recognize the jeopardy of suggesting that healthcare providers enter into financial arrangements regarding the creation of a longitudinal healthcare experience for shared patients. However, CMS has indicated that the Federal Anti-Kickback Statute Safe Harbor applies in this situation since the financial arrangements specifically involve CMS-sponsored model patient incentives (TEAM).[9] An immediate, reasonable follow-up question would be what if the participant (the acute-care hospital), is actually a healthcare system, and owns the collaborator (primary care provider, skilled nursing care provider, etc.) that the patient uses following their anchor hospitalization/procedure discharge? Unfortunately, CMS has not provided any guidance indicating an exception to Stark Law, the federal law prohibiting physician self-referrals. Of course, this creates quite the conundrum if the patient is already established with a primary care physician practice owned by the healthcare system participant. The participant can refer the patient to a downstream collaborator it does not own but is in a gainsharing arrangement with but cannot refer that same patient to a downstream collaborator it owns and with whom the patient may already have an existing relationship.

Reducing fractured, uncoordinated care during the critical post-discharge period after an anchor hospitalization or anchor procedure is one of the key goals of TEAM.[10] To further incentivize buy-in from the providers within the patient’s healthcare continuum, CMS is allowing for overlap between TEAM and other existing CMS models. For instance, Medicare patients that are aligned with an Accountable Care Organization (“ACO”) or the States Advancing All-Payer Health Equity Approaches and Development (“AHEAD”) model can also be included in a TEAM episode of care. Allowing patients to be simultaneously aligned with multiple CMS models, and without fear of CMS potentially adjusting a participant’s opportunity for reconciliation payments, should assist with buy-in from the various providers within the patient’s episode of care.[11] Of course, participants must remember that they are both required to refer patients to a primary care provider (either the provider documented on admission or options provided at discharge) and “…maintain beneficiary freedom of choice…”[12] when providing those primary care referrals. As noted earlier, this situation is highly susceptible to Stark Law violations, and will require diligence on the part of participants to ensure compliance with both Stark Law and TEAM requirements to provide referrals to primary care providers.

When considering the episode of care and post-discharge period, it is important to remember that all Medicare Part A and B items are included in the episode unless they are specifically excluded. The items and services included are[13]:

Physicians’ services
Inpatient hospital services (including hospital readmissions)
IPF services
LTCH services
IRF services
SNF services
HHA services
Hospital outpatient services
Outpatient therapy services
Clinical laboratory services
DME
Part B drugs and biologicals, except for those specifically excluded
Hospice services

TEAM is an attempt to improve patient outcomes while also reducing Medicare expenses for items such as duplicative services provided by different providers within the same episode. It remains to be seen whether TEAM will encourage or discourage healthcare system participants from owning additional services utilized within the episode of care. If the participant owns those additional services, it may discourage them from entering into “gainsharing” arrangements without outside primary care providers, as all reimbursement, including any reconciliation payments, received from CMS stays within the larger organization. However, Stark Law prevents participants from specifically referring patients at the beginning of an episode (at the point of discharge after their initial anchor hospitalization or anchor procedure) to a primary care provider they own. So, unless the patient either has an established relationship with primary care provider owned by the participant prior to the episode of care, or the patient finds the primary care provider owned by the participant, the participant is required to refer the patient to a primary care provider it does not own to continue the thirty-day post-discharge period. Does this lead larger participants to consolidate local primary care providers under their ownership, or does the cost and risk associated with owning these additional downstream collaborators exceed the potential financial rewards of owning multiple providers within a single patient’s episode of care?

Furthermore, removing the financial aspects, how does the TEAM model affect the participant’s approach to owning multiple providers within the episode from a patient care perspective? If the participant also owns the downstream collaborators, there is an increased opportunity for continuity of care, including shared medical record access, ease of communication between providers, etc. If the participant does not own the downstream collaborators, there will need to be accommodations made for sharing medical records as well as discussions and thoughts on how to agree on the patient’s care. For instance, if the patient has a knee replacement, ultimately the participant is responsible for this care outcome, but how do the participant and downstream collaborators decide on further treatment protocols. What if there is a negative development after discharge but prior to the end of the thirty-day post-discharge window? Is this a complication of the original surgical procedure or an expected outcome, and what if the participant and collaborator can’t agree? Was there an avoidable error by the participant or a downstream collaborator? Was there no error by any party, and just a negative outcome, as can happen with surgical procedures and recovery? Determining how to handle these common scenarios, both financial and otherwise, will directly impact buy-in from the overall care team.

Accurate medical record documentation will be more important to TEAM participants than ever before for a couple of reasons. First, there is a list of specifically excluded items from TEAM. Documentation accuracy will be imperative to ensure the episode really does involve one of these excluded items as well as to ensure that any additional reimbursement possibilities are captured. The excluded items include[14]:

Inpatient hospital admissions for MS-DRGs that group to the following categories:
- Oncology, Trauma medical, Organ transplant, and Ventricular shunt
Inpatient hospital admissions that fall into the following Major Diagnostic Categories (“MDCs”):
- MDC 02 (Diseases and Disorders of the Eye)
- MDC 14 (Pregnancy, Childbirth, and Puerperium)
- MDC 15 (Newborns)
- MDC 25 (Human Immunodeficiency Virus (“HIV”))
Traditional pass-through payments for medical devices
New technology add-on payments
Hemophilia clotting factor products
Part B payment for low-volume drugs, high-cost drugs and biologicals, and blood clotting factors for Hemophilia

Of the excluded items noted above, new technology add-on payments and Medicare Part B payment for varying drugs and/or clotting factors particularly resonate with the need for accurate medical record documentation. Both categories of excluded items from the standard TEAM target price represent increased costs associated with the care provided to the patient, as well as an opportunity for increased reimbursement. As CMS works to reduce the overall payments for episodes of care through the elimination of duplicative services, complications arising from fractured care, etc., participants and downstream collaborators need to focus their efforts on improving documentation to recoup all money they are entitled to for the episode of care provided. Given that one of the purposes of TEAM is reducing Medicare costs, it is conceivable that CMS will scrutinize the documentation of both participants and collaborators for patients meeting TEAM criteria. While only participants receive reimbursement based on TEAM target pricing, both participants and collaborators may be entitled to various add-on payments depending on the services they provide during the initial anchor hospitalization/procedure and post-discharge period. While the participant visits are distinct from collaborator visits, is it possible that CMS may eventually review the documentation as a continuous care episode at some point? Could conflicting documentation between the participants and collaborators lead to reimbursement delays, etc.? While these concerns have not yet been identified by CMS, it is one more reason why buy-in is needed from all providers within the care of episode.

Documentation accuracy will also be a key factor in mitigating risk adjustment associated with TEAM target pricing. CMS is risk-adjusting the target prices based on two general factors: beneficiary-level factors and hospital-level factors. Beneficiary-level factors include items such as patient age, economic status, and the number of Hierarchical Condition Categories (“HCCs”) captured during the designated 180-day lookback period. Hospital-level factors include hospital characteristics, including bed size and safety-net designation.[15] While risk adjustment is often associated with Medicare Advantage, it is also utilized in Original Medicare. Currently, TEAM includes Original Medicare patients only, but there is no way to know if that will change. Both participants and downstream collaborators should use this opportunity to ensure their HCC documentation is complete and accurate, including in the baseline and lookback periods. Strengthening documentation and ensuring alignment between inpatient and outpatient coding will help support appropriate target pricing and reduce reconciliation risk. Likewise, participants and collaborators need to be aware that eventually CMS could review the care episode as a single entity, and conflicting documentation between the providers’ medical records could lead to reduced reimbursement, or even denials. Even though MA episodes are not bundled under TEAM, hospitals that approach Medicare Advantage and risk adjustment as separate priorities may still see indirect effects on quality performance and overall financial results. Comprehensive coding and risk strategies across all Medicare populations are becoming increasingly important in this environment.

Buy-In by the “Team” for “TEAM”

CMS’ new TEAM model aims to redefine the longitudinal-care experience of patients from the time of their initial anchor hospitalization/procedure through the end of the thirty-day post-discharge period. Currently, both participant acute-care hospitals and downstream collaborators (primary care providers, skilled nursing providers, etc.), are still submitting claims in their traditional payment formats (fee-for-service, etc.). However, CMS is starting a payment transformation with the participants and slowly working to move them from their traditional fee-for-service reimbursement to a single target payment based on a defined episode of care. With real-world implications related to reduced reimbursement, participants must start working with collaborators now on forming partnerships for the benefit of patient care. The trick is going to be getting buy-in from the collaborators. Currently, there are no reimbursement repercussions for collaborators that do not assist the participants in ensuring coordination of patient care and/or keeping costs for the episode under the target price. CMS has carved out an exception using the Anti-Kickback Statute Safe Harbor to allow participants and collaborators to enter financial arrangements to encourage collaboration, but it still remains to be seen if participants will want to share their target price reimbursements (which may already be reduced from the customary fee-for-service reimbursement). However, without these financial arrangements, collaborators may be unwilling to become overly invested in TEAM. In addition, it does not appear that CMS carved out an exception to Stark Law, allowing participants to refer discharging patients to collaborators owned by the participants. Because of this, participants that also own primary care providers are going to be required to refer patients outside of their corporate network unless that patient already has an existing relationship with a primary care provider owned by the provider or finds those primary care providers on their own. This element alone will require monitoring and auditing by CMS to ensure buy-in from the participants that they are not violating Stark Law. It is too early to tell whether collaborator doors will be opened or closed due to TEAM. Much like anything, it likely depends on the individuals making the decisions at each collaborator office and whether they are inclined or not to participate. Without changes to TEAM, we don’t see evidence indicating collaborators will be incentivized to buy-in to the model except in doing what’s best for the patient. While that should always be the goal, it often is not.