1. Executive Summary and Strategic Context

The Transforming Episode Accountability Model (TEAM) represents the most significant mandatory bundled payment initiative from the CMS Innovation Center since the Comprehensive Care for Joint Replacement (CJR) model. Launching January 1, 2026, TEAM mandates participation for approximately 750 acute care hospitals across 188 Core-Based Statistical Areas (CBSAs), covering five high-volume surgical episode categories over a five-year performance period ending December 31, 2030.

CMS estimates TEAM will save the Medicare program $481 million over five performance years, primarily through reduced post-acute care utilization, decreased avoidable readmissions, and improved care coordination. Unlike voluntary bundled payment models (BPCI Advanced), TEAM's mandatory nature ensures broad adoption and eliminates favorable selection bias that has limited the generalizability of previous episode-based payment models.

1.1 Strategic Significance

TEAM is the operational bridge between CMS's legacy bundled payment experiments and its 2030 vision of universal accountable care relationships for all Medicare beneficiaries. It builds on lessons from CJR ($112.7 million in savings across 323 hospitals in 2021-2023) and BPCI Advanced, but introduces critical new design elements: mandatory participation for rural and safety net hospitals, a primary care referral requirement linking surgical episodes to longitudinal care, and a quality scoring mechanism that directly adjusts financial reconciliation.

For health systems, TEAM creates both an operational challenge and a strategic opportunity. Organizations that master episode cost management and quality optimization will generate significant shared savings. Those that fail to prepare risk material financial penalties beginning in Performance Year 2, when two-sided risk becomes mandatory for most participants.

2. Model Architecture and Regulatory Framework

2.1 Legal Authority and Rulemaking History

TEAM was authorized under Section 1115A of the Social Security Act, granting the CMS Innovation Center authority to test innovative payment and service delivery models. The model was finalized through two consecutive IPPS rulemaking cycles:

FY 2025 IPPS Final Rule (CMS-1808-F): Published August 28, 2024 in the Federal Register. Established the TEAM model framework including episode definitions, participation requirements, CBSA selection methodology, target pricing approach, quality measures, and financial risk tracks.

FY 2026 IPPS Final Rule (CMS-1833-F): Published August 4, 2025 in the Federal Register. Finalized updates including deferment periods for newly eligible hospitals, exclusion of IHS/Tribal hospitals from mandatory participation, normalization factor changes from national to regional rates, and elimination of voluntary health equity reporting.

2.2 Model Performance Period

Performance Year	Dates	Baseline Period	Key Feature
PY 1	Jan 1 - Dec 31, 2026	CY 2022-2024	Glide path year (Track 1 upside-only for all)
PY 2	Jan 1 - Dec 31, 2027	CY 2023-2025	Two-sided risk mandatory (Track 3); Track 2 for eligible
PY 3	Jan 1 - Dec 31, 2028	CY 2024-2026	PRO-PM added; safety net exits Track 1
PY 4	Jan 1 - Dec 31, 2029	CY 2025-2027	Full risk exposure for all tracks
PY 5	Jan 1 - Dec 31, 2030	CY 2026-2028	Final year; evaluation data through CY 2031

2.3 Episode Definitions and Trigger Codes

Each TEAM episode begins with an anchor event (inpatient hospitalization or qualifying outpatient procedure) and extends 30 days post-discharge. This is a critical departure from BPCI Advanced's 90-day episodes, significantly narrowing the cost management window.

Episode Category	MS-DRG Codes (Inpatient)	HCPCS Codes (Outpatient)	CMS Discount Factor
Lower Extremity Joint Replacement (LEJR)	469, 470, 521, 522	27447, 27130, 27702	2.0%
Surgical Hip/Femur Fracture Treatment (SHFFT)	480, 481, 482	N/A (inpatient only)	2.0%
Coronary Artery Bypass Graft (CABG)	231, 232, 233, 234, 235, 236	N/A (inpatient only)	1.5%
Spinal Fusion	402, 426-430, 447-448, 450-451, 471-473	22551, 22554, 22612, 22630, 22633	2.0%
Major Bowel Procedures	329, 330, 331	N/A (inpatient only)	1.5%

Note: The discount factors (1.5% for CABG and major bowel; 2.0% for LEJR, SHFFT, and spinal fusion) were reduced from the originally proposed 3% in response to significant stakeholder concern about financial risk exposure. These discounts represent Medicare's share of expected savings and are applied to benchmark prices before reconciliation.

3. Participation Requirements and Eligibility

3.1 Mandatory Participation Criteria

TEAM participation is mandatory for all acute care hospitals that meet ALL of the following criteria:

Payment System: Paid under both the Medicare Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS).

Geographic Location: CMS Certification Number (CCN) primary address located in one of 188 mandatory CBSAs selected through stratified random sampling.

Episode Initiation: Hospital must initiate qualifying TEAM episodes (anchor hospitalizations or anchor procedures) for Original Medicare beneficiaries.

3.2 Included and Excluded Hospital Types

Included (Mandatory)

Excluded

Standard IPPS hospitals in selected CBSAs

Maryland hospitals (Maryland TCOC Model)

Safety net hospitals

Indian Health Service / Tribal hospitals (per FY 2026 Final Rule, not paid under OPPS)

Rural hospitals (PPS-paid)

Hospitals with no TEAM episodes initiated

Sole Community Hospitals (SCHs)

Critical Access Hospitals (not paid under IPPS)

Essential Access Community Hospitals

Medicare Dependent Hospitals (MDHs)

Low-volume TEAM episode hospitals

Critical Strategic Point: Unlike the CJR model, which exempted rural and low-volume hospitals, TEAM mandates their participation. This is a deliberate CMS policy decision to expand VBC exposure to providers that have historically avoided alternative payment models, but it creates significant financial and operational risk for these under-resourced facilities.

3.3 Voluntary Opt-In

Hospitals currently participating in BPCI Advanced or CJR that are NOT located in a mandatory CBSA were offered a one-time voluntary opt-in opportunity. This window required enrollment prior to the last day of the last performance period/year of their respective current model. CBSAs containing BPCI Advanced or CJR hospitals were placed in stratum 18 with the lowest selection probability for mandatory participation, reducing overlap.

3.4 Deferment Period for Newly Eligible Hospitals

The FY 2026 Final Rule introduced a deferment period: hospitals that newly meet TEAM participant criteria after the model start (e.g., new CCN issued after December 31, 2024, or newly qualifying status) are not required to participate until the beginning of the performance year following one full performance year since their Medicare ID initial effective date. This provides at least one year of preparation before mandatory participation begins.

3.5 Beneficiary Eligibility

TEAM beneficiaries are Medicare fee-for-service beneficiaries who, at the time of admission or anchor procedure, are enrolled in Original Medicare (Part A and B). The episode is attributed to the hospital where the anchor event occurs. Beneficiaries retain full freedom of choice; TEAM does not restrict provider selection, impose prior authorization, or alter benefit design.