Strategies for hospitals to prepare for TEAM | Viewpoint

Beginning January 1, 2026, hospitals selected for participation in the Transforming Episode Accountability Model (TEAM) will be financially accountable for the total cost of certain episodes of care for traditional Medicare beneficiaries.

Although the launch is just weeks away, a number of impacted hospitals are struggling to prepare sufficiently for the model.

The scope of TEAM

In August 2024, the Centers for Medicare & Medicaid Services (CMS) released its 2025 Hospital Inpatient Prospective Payment System (IPPS) Final Rule, memorializing its proposal to require nearly 750 hospitals located in selected core-based statistical areas (CBSAs) to participate in the new mandatory payment model.

These hospitals will be financially accountable for episodes of care anchored by one of the following procedures: coronary artery bypass graft surgery; lower extremity joint replacement; major bowel procedure; surgical hip/femur fracture treatment; and spinal fusion.

Under TEAM, selected hospitals receive standard fee-for-service payments but are also evaluated against episode target prices and 3-6 quality measures. Hospitals with costs below the target and with quality at or above the standards receive performance bonuses; conversely, those with costs higher than the target may be penalized.

In this way, hospitals are incentivized to use a value-based care approach, which rewards coordination, quality, and efficiency, not volume of services provided.

Struggling to prepare

While many hospitals are successfully preparing for their participation in TEAM, others struggle to be ready. The delay is understandable.

The administrative burden of analyzing internal TEAM episodes data, building teams, evaluating historical performance on TEAM quality measures, assessing opportunities for cost savings and better outcomes, and communicating with key stakeholders is proving overwhelming, especially during a time of major changes and uncertainty in the U.S. healthcare system.

In addition to the imminent launch of TEAM, hospitals are facing new regulations imposed through the One Big Beautiful Bill Act, including cuts to Medicaid, potentially leading to an increase in uncompensated care and a reduction in reimbursement; caps on federal student loans, which could reduce funding for medical education and exacerbate the physician shortage; and tax law changes that could impact health systems’ financial strategies.

Beyond new regulatory changes, hospitals also are navigating unprecedented workforce shortages, supply chain disruptions, tariff impacts, and increasing costs, and institutions with limited infrastructure and resources are particularly impacted.

Proof of success

Admittedly, TEAM will require significant time, effort, and resources to fully implement, yet hospitals can be reassured and learn from recent Bundled Payment for Care Improvement – Advanced (BPCI-A) history. About two-thirds of hospitals participating in the voluntary program reduced expenditures while maintaining quality-related health outcomes. These experiences can help inform strategies for hospitals participating in TEAM.

Here to stay

Although many hoped CMS would pull back on the TEAM rollout at the start of the Trump administration, the agency did not. In its 2026 IPPS final rule released in late July, CMS made only a dozen relatively minor changes. Clearly, TEAM is here to stay.

Hospitals that are not ready should immediately take action to ensure their operations are not disrupted and they are positioned to benefit from potential profits and avoid penalties.

Not too late: TEAM strategies

Hospitals that have been struggling to prepare—and even those well on their way in preparing for TEAM—can position themselves for success by prioritizing data analysis and relationship-building using several key TEAM preparation strategies.

Analyze data

• Empower an organization-wide working group to analyze and summarize Medicare claims data to evaluate the historical performance your organization would have within TEAM episodes and identify areas of opportunity for improvement;
• Compare TEAM target prices to actual cost trends by diagnosis-related group (DRG) and provider;
• Find areas of cost variation, service delivery, and patient outcomes to identify areas for better care coordination;
• Look for trends in post-acute care spending, average length of stay, and readmission rates by episode time to identify preferred post-acute care providers;
• Use the claims data to understand volume and variation in episodic costs by physician and care setting and segment costs by inpatient anchor stay, inpatient readmission, and post-acute care-related costs;
• Assess the lengths of stay of readmissions and inpatient rehabilitation stays and note the facilities to which patients were admitted;
• Using TEAM quality measures, evaluate collaborators’ historical performance data

Develop collaborator agreements

• Compile a list of potential collaborators (providers who furnish and can help manage care during TEAM episodes);
• Determine a method for calculating collaborator payments (reconciliation payments and internal cost savings);
• Assess whether any existing agreements should be dismantled to prevent duplication;
• Finalize collaborator agreement structure and consider creating a value-based enterprise;
• Working with collaborators, enhance operational improvement workplans for individual episodes;

Evaluate optimization and cost-saving opportunities

• Look for opportunities from pre-surgery optimization, post-acute care alignment, and primary care referrals;
• Finalize Year 1 internal cost savings opportunities and verify collaborator impact on potential savings;
• Develop dashboards to track data for each episode performance and cost savings.

Finally, as 2025 nears its end, hospitals should complete fair market value opinions for collaborator agreements where needed and implement the operational improvement workplan.

For the nearly 750 hospitals in TEAM, the workload to prepare for launch on January 1, 2026, can be substantial, even overwhelming. A step-by-step strategic approach, however, makes the preparation manageable, leading to improved operations, better control of costs, and potentially improved patient outcomes.

Carol Carden is managing principal of compensation valuation planning & design at PYA, P.C. Angie Caldwell is principal and Tampa office managing principal at PYA, P.C.