Breaking Down TEAM and the New CMS FY 2026 Proposed Rule Changes

TEAM Background

The CMS Innovation Center established the Transforming Episode Accountability Model (TEAM) in the FY 2025 IPPS/LTCH PPS final rule issued on August 28, 2024. 
 
TEAM is a 5-year, mandatory, alternative payment model designed by the CMS Innovation Center that will run from January 1, 2026 to December 31, 2030. TEAM will test whether an episode-based pricing methodology linked with quality measure performance for select acute care hospitals will reduce Medicare program expenditures while preserving or improving the quality of care for Medicare beneficiaries who initiate one of five surgical episode categories:

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

TEAM participants will have three track options with graduated levels of risk:

• Track 1 will have no downside risk and offers lower levels of reward for the first year, or up to three years for safety net hospitals.
• Tracks 2 and 3 both include two-sided risk:
  • Track 2 will be associated with lower levels of risk and reward for certain TEAM participants, such as safety net hospitals or rural hospitals, for years 2 through 5
  • Track 3 will be associated with higher levels of risk and reward for years 1 through 5.

Performance in the model will be assessed by comparing TEAM participants’ actual Medicare FFS spending during a performance year to their reconciliation target price as well as by assessing performance on selected quality measures. TEAM participants may earn a payment from CMS, subject to a quality performance adjustment, if their spending is below the reconciliation target price. TEAM participants may owe CMS a repayment amount, subject to a quality performance adjustment, if their spending was above the reconciliation target price.
 
CMS estimates that testing TEAM will save the Medicare program $481 million across the 5 performance years.
 
On April 11, 2025, CMS proposed a number of changes to TEAM within the FY 2026 IPS/LTCH PPS proposed rule. The proposed rule has a 60-day public comment period which ends on June 10, 2025.

Impact Analysis of the Proposed Changes

Most of the proposed changes are administrative in nature. However, two of the proposed changes will affect the TEAM scope in an effort to reduce the burden on TEAM participants. These are elimination of the mandatory health equity provisions and the voluntary decarbonization provisions. 
 
The remainder of this post itemizes the proposed changes.

TEAM—Proposed Changes

Participation

• Implementing a limited deferment period for certain hospitals that meet the definition of a TEAM participant after December 31, 2024.
• Linking Track 2 participation eligibility for hospitals with a Medicare Dependent Hospital (MDH) designation to their MDH status on the date that CMS requires TEAM participants to submit their track selection for the upcoming PY.
  

Quality Measurement

• Adding the Information Transfer Patient Reported Outcome-Based Performance Measure (Information Transfer PRO-PM).
• Applying a neutral quality measure score for TEAM participants with insufficient quality data.

Target Pricing

• Introducing a methodology to construct target prices when there are coding changes.
• Reconstructing the normalization factor and prospective trend factor.
• Replacing the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI).
• Using a 180-day lookback period and Hierarchical Condition Categories (HCC) version 28 for beneficiary risk adjustment.
• Aligning the date range used for episode attribution. 

Care Delivery

• Expanding the Skilled Nursing Facility (SNF) 3-Day Rule Waiver.
• Removing the health equity provisions.
• Removing the voluntary Decarbonization and Resilience Initiative.

Amid ongoing challenges and cancellations across government programs, episode programs like TEAM (and its predecessor BPCI) remain steadfast. These programs continue to deliver value and savings to stakeholders, which is why we are seeing increased interest across the market in the insights they deliver about cost and quality.

Drive Results with TEAM-Specific Insights

SpectraMedix gives health systems the insights they need to succeed under TEAM bundled payment models—highlighting cost drivers, pinpointing underperformance, and uncovering opportunities to improve.

Learn how our platform supports smarter bundled payment management and advances value-based contract success.