Cut through the noise, find the signal: Intelligence for serious healthcare leaders
Analysis updated November 9, 2026
TEAM is the most consequential mandatory episode-based payment model CMS has launched since the original Comprehensive Care for Joint Replacement (CJR) model in 2016 — and its design is structurally more aggressive. With 716 participating hospitals across selected Core-Based Statistical Areas, running from January 1, 2026 through December 31, 2030, this is not a voluntary experiment. It is CMS using its Section 1115A authority to reshape surgical care delivery at scale.
The five episode categories — lower extremity joint replacement (LEJR), surgical hip femur fracture treatment (SHFFT), spinal fusion, coronary artery bypass graft (CABG), and major bowel procedure — are not randomly selected. These are high-volume, high-expenditure procedures with well-documented post-acute care variation, precisely where FFS payment fragmentation creates the largest Medicare spending inefficiency. CMS is not testing whether bundled payments work for these procedures; evidence from BPCI Advanced and CJR already answered that question. TEAM is testing whether mandatory participation accelerates the savings curve that voluntary models only partially delivered.
The discount factors embedded in target prices reveal CMS's savings expectations explicitly: 1.5% for CABG and major bowel procedures, and 2% for LEJR, SHFFT, and spinal fusion. These are Medicare's mandatory take rates before a single episode begins. A hospital with $50 million in annual TEAM episode spending is writing CMS an immediate $750,000–$1,000,000 efficiency check just to break even at target. The 3-year rolling baseline period (PY1: January 1, 2022–December 31, 2024; PY2: January 1, 2023–December 31, 2025) means target prices chase actual market cost reductions forward — there is no permanent floor.
The post-episode spending monitor is an underappreciated structural feature. If a participant's average post-episode spending exceeds three standard deviations above regional average in the 31–60 day window, that overage is subtracted directly from the Net Payment Reconciliation Amount (NPRA). This closes the care-shifting loophole that plagued earlier bundled payment models and creates a genuine 60-day accountability window, not 30.
The CJR-X exclusion is architecturally significant: hospitals in TEAM are explicitly excluded from the mandatory Comprehensive Care for Joint Replacement Expanded model during their TEAM participation. This prevents double-counting but also means TEAM hospitals cannot hedge their LEJR exposure across two models simultaneously.
The three-track structure creates meaningfully different financial profiles. Track 1 (upside only, 10% stop-gain, no stop-loss) is the safety valve — appropriate for Year 1 infrastructure-building, but it caps reconciliation payment upside at 10% of aggregated target price and delivers no downside protection because there is no downside exposure. Track 3 (20% stop-gain, 20% stop-loss) is where real money moves in both directions. A hospital with $30 million in TEAM episode target prices in Track 3 faces a maximum repayment exposure of $6 million and maximum reconciliation payment potential of $6 million — before quality adjustment.
Quality adjustment through the Composite Quality Score (CQS) is not trivial. Under Track 3, a hospital with a CQS of 0 on a negative reconciliation of -$10,000 owes the full amount; a CQS of 100 reduces that liability by 10% ($1,000). Under Track 2, the CQS adjustment on negative reconciliations reaches up to 15% — meaning high-quality safety net hospitals in Track 2 have a structurally better quality-adjusted loss floor than Track 3 hospitals. That 5-percentage-point difference in downside quality protection is a meaningful reason for eligible safety net and rural hospitals to prefer Track 2 over Track 3 in years where their quality scores are strong.
Break-even calculus for a mid-size TEAM participant (illustrative, using model mechanics): A hospital initiating 400 LEJR episodes annually at a regional average episode cost of $22,000 (Medicare Parts A+B combined) carries approximately $8.8 million in LEJR episode spending. With a 2% discount factor, that hospital must generate roughly $176,000 in annual LEJR savings simply to break even at target — before any reconciliation payment. Achieving a 5% spending reduction below target generates a gross positive reconciliation of approximately $440,000, subject to CQS adjustment. Post-acute care redesign — specifically SNF utilization management — is typically where this savings margin is captured or lost.
The SNF 3-day rule waiver, available for discharges to SNFs rated 3+ stars for at least 7 of the prior 12 months (verified quarterly), is a direct cost-management lever. Hospitals that actively steward patients to outpatient procedures and use the waiver to avoid unnecessary 3-day inpatient stays reduce both anchor episode costs and SNF exposure. The telehealth waiver (home-based, geographic restrictions removed for TEAM beneficiaries during the 30-day episode) enables low-cost post-discharge monitoring that can prevent the readmissions driving negative reconciliation.
The low-volume policy provides partial protection: hospitals with 30 or fewer baseline episodes in a given category over the 3-year baseline period face no downside risk in that category — but can still receive positive reconciliation payments. This asymmetric protection matters for small hospitals with thin CABG or major bowel volumes.
Advantaged organizations: Health systems with mature care coordination infrastructure, existing SNF preferred network relationships, and employed orthopedic and cardiac surgery programs are best positioned. They can capture the management layer without building from scratch and can direct patient flow to high-performing PAC partners efficiently. Systems already operating in MSSP ACOs have overlapping data infrastructure and care transition protocols that translate directly.
Disadvantaged organizations: Independent community hospitals in mandatory CBSAs without prior bundled payment experience face the steepest climb. They bear full mandatory participation but lack the longitudinal claims analytics, care navigator staffing, and PAC network leverage of their system-affiliated competitors. The model's mandatory design captures exactly these hospitals — that is a feature, not a flaw, from CMS's perspective — but the financial risk is real. A Track 1 year buys time; it does not build capability.
Market consolidation implications are significant. TEAM creates financial pressure that will accelerate hospital-to-system affiliation in mandatory CBSAs, particularly for independent hospitals with high SHFFT or spinal fusion volumes where post-acute cost variation is widest. Gainsharing arrangements with PAC collaborators (explicitly permitted under the Anti-Kickback Statute safe harbor for CMS-sponsored model arrangements) allow TEAM hospitals to formalize preferred PAC networks — a structural advantage for systems with owned or closely affiliated SNF and home health capacity.
ACO interaction is explicitly designed to be additive. Beneficiaries aligned to MSSP ACOs remain in TEAM episodes if they receive qualifying surgery at a TEAM hospital — CMS does not adjust TEAM reconciliation for ACO alignment. This means ACO shared savings and TEAM reconciliation payments can theoretically stack at the system level, rewarding organizations that operate both longitudinal and episodic accountability simultaneously. For health system strategists, this dual participation is the highest-value positioning available in the current CMMI model landscape.
Medicare Advantage plans are structurally outside TEAM (MA beneficiaries are explicitly excluded from episode inclusion criteria), but the model indirectly affects MA competitive dynamics in mandatory CBSAs. As TEAM hospitals improve surgical care coordination for FFS beneficiaries, the operational protocols they develop — preferred PAC networks, discharge planning workflows, telehealth follow-up — improve care quality broadly. MA plans contracting with TEAM hospitals in those markets should monitor whether improved FFS episode performance correlates with reduced MA readmission rates, which would affect risk adjustment and star ratings.
Physician perspective: The mandatory primary care referral requirement — hospitals must refer every TEAM beneficiary to an established primary care supplier at or before discharge — creates a new administrative obligation for surgical teams. More importantly, it establishes a CMS-enforced handoff protocol that affects physician workflow. Orthopedic and cardiac surgery programs that have historically operated in isolation from primary care now have a compliance obligation that changes discharge planning practice. Gainsharing arrangements allow hospitals to extend financial alignment downstream to participating physicians and collaborators, which is the primary mechanism for surgical program buy-in.
Health system perspective: TEAM is a margin compression event for systems that do not actively manage it, and a margin enhancement opportunity for systems that do. The 2% discount on LEJR and spinal fusion — the two highest-volume TEAM procedure categories — means every dollar of post-acute cost inefficiency comes directly off the bottom line. Systems should model their current FFS episode spending against preliminary target prices (available via the TEAM CET as of November 2026 for PY2) before PY2 track selection to avoid defaulting into Track 3 without understanding their exposure.
Hospital perspective: The track selection default rule is operationally critical: hospitals that miss the PY1 track selection deadline are automatically assigned to Track 1; hospitals that miss the deadline for PY2–5 are automatically assigned to Track 3. A hospital with deteriorating quality scores and rising post-acute costs that defaults into Track 3 faces 20% stop-loss exposure with reduced CQS protection. Track selection discipline — using interim reconciliation target price reports (released quarterly in the TEAM CET) to gauge performance trajectory before each PY deadline — is a minimum competency requirement for TEAM participants.
Payer/MA plan perspective: Short-term operational impact is limited given MA exclusion, but TEAM's mandatory design in selected CBSAs will reshape hospital-PAC referral patterns in those markets durably. MA plans should anticipate that preferred SNF and home health networks in TEAM CBSAs will increasingly be structured around TEAM hospital priorities, not MA plan priorities — and should proactively align their own preferred PAC contracting with TEAM hospital partners to avoid being disadvantaged in post-acute care access and quality.
TEAM contact: CMMI_TEAM@cms.hhs.gov | Model active through December 31, 2030 | 716 participating hospitals as of current reporting