Transforming Episode Accountability Model (TEAM)

Analysis updated November 9, 2026

Strategic questions for your team

What is our hospital's projected net financial exposure under Track 3's 20% stop-loss limit versus Track 2's 5% stop-loss limit, calculated against our actual baseline episode volume and spending for all five TEAM procedure categories (LEJR, SHFFT, Spinal Fusion, CABG, and Major Bowel), and does our current operating margin and liquidity position support absorbing a worst-case repayment obligation before the annual reconciliation cycle?
Have we downloaded and analyzed our Preliminary Target Price data from the TEAM Custom Export Tool — specifically the DRG-Region and hospital-specific target price files with the 1.5% discount factor applied to CABG and Major Bowel episodes and the 2% discount applied to LEJR, SHFFT, and Spinal Fusion episodes — and do our actual per-episode costs in each category currently fall below, at, or above those benchmarks?
Given that all non-safety-net, non-rural hospitals must move to Track 3 (20% stop-gain/stop-loss) by PY2 (2027) with no option to remain in Track 1 beyond PY1 (2026), do we have sufficient care coordination infrastructure, post-acute network management capabilities, and data analytics resources in place to operate competitively under full two-sided risk within 12 months of model launch?
What is our current Composite Quality Score trajectory across all three PY1 quality measures — the Hospital-Wide All-Cause Readmission Measure (HWR), CMS PSI 90, and THA/TKA PRO-PM — relative to the national percentile distribution of TEAM-eligible hospitals, recognizing that a CQS of 0 versus 100 can shift a Track 3 positive reconciliation amount by up to 10% and a Track 2 negative reconciliation amount by up to 15%, and that four additional safety measures replace PSI 90 beginning in PY2?
Have we identified and contracted with a preferred network of qualified SNFs (rated 3+ stars for at least 7 of the past 12 months per the quarterly CMS Qualified SNF List) and swing-bed providers to operationalize the SNF 3-Day Rule Waiver, and do our discharge planners have real-time access to that quarterly list to avoid rejected claims from non-qualified facilities?
Have we established the internal governance structure, data custodian designations, and completed the annual Data Request and Attestation (DRA) form and Data Sharing Agreement (DSA) in the TEAM Portal to ensure uninterrupted access to monthly raw performance year claims data and quarterly dashboard reports, given that failure to submit by the 1st of each month forfeits eligibility for that month's data release?
Do we qualify as a safety net hospital — defined as exceeding the 75th percentile for dual-eligible or Part D low-income subsidy patients among all IPPS hospitals over the rolling 3-year baseline — and if so, have we modeled the financial and strategic value of remaining in Track 1 through PY3 versus accelerating to Track 3 to maximize reconciliation payment upside given our episode volume and cost structure?
Have we mapped all five TEAM episode categories to our existing ACO alignments and physician group relationships to design gainsharing arrangements (covering both reconciliation payment distributions and alignment payment obligations) that comply with the Anti-Kickback Statute safe harbor at 42 CFR 512.565–512.576, and have we identified which downstream collaboration agents and PAC providers will be included in distribution arrangements?
Have we implemented the TEAM telehealth waiver billing protocols — specifically HCPCS codes G0665 through G0668 billed under TOB 13X with demonstration code A9 as a standalone claim — and do our clinical and revenue cycle teams understand that telehealth claims submitted with other Medicare FFS services on the same claim will be returned by the MAC, jeopardizing post-discharge monitoring during the 30-day episode window?
Have we assessed whether our episode volume in any single category falls at or below 30 baseline episodes — triggering the low-volume policy that eliminates downside risk for that category while preserving upside reconciliation eligibility — and are we using this threshold strategically in our track selection and care redesign prioritization decisions across all five surgical procedure types?

Traps and concerns

Default Track 3 Assignment Triggers Uncapped Downside
Any TEAM participant that fails to affirmatively notify CMS of their track selection before each performance year deadline is automatically assigned to Track 3 for PY2-PY5. Track 3 carries a 20% stop-loss limit — meaning a hospital's repayment obligation can reach up to 20% of its aggregated reconciliation target price. For a hospital with $50M in annual TEAM episode spending, that exposure ceiling is $10M. Unlike the PY1 default (Track 1, upside-only), the PY2-PY5 default is the highest-risk option. Hospitals that assume Track 1 protection persists without active re-election face catastrophic surprise repayment demands. This risk is compounded for safety net and rural hospitals that ARE eligible for Track 2 (5% stop-loss) but forfeit that protection through administrative inaction.
SNF Waiver Billing Errors Trigger MAC Claim Returns
The SNF 3-Day Rule Waiver requires precise billing execution: Type of Bill must be 21X (or 18X for CAHs), Demonstration Code A9 must appear in the First Treatment Authorization Code Field (2300 REF02 Segment, REF01=P4), and Occurrence Span Code 70 must reflect a stay under 3 calendar days. CMS explicitly states that regional MACs will return claims that do not meet all criteria or if the waiver claim is submitted on the same claim as other Medicare FFS services. Returned claims mean the SNF bears immediate cash flow disruption with no Medicare Part A payment until corrected resubmission. Additionally, the waiver only applies to SNFs maintaining a CMS Five-Star rating of 3 stars or better for at least 7 of the prior 12 months — a threshold that is reviewed quarterly. A preferred SNF partner dropping off the qualified list mid-quarter invalidates waiver coverage for discharges after that point, exposing the TEAM hospital to unplanned post-discharge cost spikes if patients are redirected to higher-acuity settings.
Quality Score Gaps Erode Positive Reconciliation by Up to 10%
The Composite Quality Score (CQS) directly adjusts reconciliation amounts: for positive reconciliation, a CQS of 0 triggers a 10% reduction across all three tracks. For a hospital earning a $5M positive reconciliation, a CQS of 0 means forfeiting $500,000 in earned savings. Conversely, Track 2 participants with a CQS of 100 can reduce their negative reconciliation obligation by 15%, while Track 3 participants receive only a 10% reduction. The THA/TKA PRO-PM measure (CMIT ID #1618) applies only to inpatient LEJR episodes — hospitals with low LEJR volume receive a neutral score of 50 for that measure, which may asymmetrically weight their CQS toward the HWR and PSI-90 scores. Beginning PY2, the PSI-90 is replaced by three new measures (Falls with Injury, Postoperative Respiratory Failure, Failure-to-Rescue), and PY3 introduces the Information Transfer PRO-PM for outpatient episodes — each transition creates a window where hospitals have no historical performance baseline for the new measures, increasing CQS unpredictability.
Post-Episode Spending Clawback Penalizes Legitimate Care Shifting
CMS calculates post-episode spending for the 30-day window following episode completion and monitors for care shifting. If a TEAM participant's average post-episode spending exceeds three standard deviations above the regional average, the amount above that threshold is subtracted from the Net Payment Reconciliation Amount (NPRA). Hospitals that successfully compress within-episode costs by discharging patients earlier or reducing PAC utilization may inadvertently concentrate care needs in the post-episode period — triggering this clawback mechanism. There is no corresponding upside for hospitals whose post-episode spending is below regional average. This creates an asymmetric penalty that is particularly hazardous for hospitals managing high-acuity CABG or major bowel patients with legitimate complex recovery trajectories, as those episode categories carry only a 1.5% discount factor versus 2% for LEJR and spinal fusion.
Mandatory Episode Inclusion Despite Outpatient Procedure Ambiguity
TEAM episodes are triggered not only by inpatient MS-DRG admissions but also by outpatient HCPCS codes — including LEJR codes 27447, 27130, 27702 and spinal fusion codes 22551, 22554, 22612, 22630, 22633. Hospitals whose outpatient surgical volumes are growing as a result of site-of-care shifts (a broader CMS policy priority under the Trump administration) will capture more episodes than their baseline data reflects, since target prices for PY1 are based on January 1, 2022 through December 31, 2024 baseline data. Additionally, MS-DRGs 523, 524, and 525 were added as spinal fusion triggers only on October 1, 2026 — mid-PY1 — meaning hospitals had no baseline episode history for those DRGs and may face target price misalignment for those cases. Hospitals relying on PY1 preliminary target prices distributed prior to that October 2026 DRG addition should validate whether their DRG-region target prices were updated in the September 2026 technical specification refresh.
Data Sharing Deadline Failures Cut Off Performance Intelligence
TEAM participants must submit an updated Data Request and Attestation (DRA) form and Data Sharing Agreement (DSA) annually, with separate deadlines for each performance year's data access. For PY1, different cohorts of participants had DRA/DSA deadlines of April 11, 2025 (first batch), May 26, 2025 (second batch), and September 22, 2025. For monthly performance year data and quarterly dashboards, participants must submit DRA/DSA updates by the 1st of each month to receive that month's files. Missing a monthly deadline means losing access to the claims-level data needed to monitor episode spending trajectories in real time. Without monthly raw episode and claims data — which cover inpatient, outpatient, carrier, DME, SNF, home health, and hospice settings — hospitals cannot identify cost outliers or adjust care protocols before year-end reconciliation. CMS explicitly reserves the right under 42 CFR §512.592(b) to discontinue data sharing entirely as a remedial action for noncompliance, eliminating the hospital's primary performance management tool.
ACO Overlap Creates Dual Accountability Without Reconciliation Offset
TEAM explicitly permits beneficiaries aligned to ACO initiatives to be included in TEAM episodes simultaneously, and CMS will not adjust a TEAM participant's reconciliation amount based on beneficiary ACO alignment. This means a hospital in a mandatory TEAM CBSA that is also affiliated with an ACO bears full financial accountability for the TEAM episode cost — including all Part A and B spending for 30 post-discharge days — while the ACO separately carries accountability for total cost of care for the same beneficiary. Care coordination decisions that the ACO incentivizes (e.g., avoiding SNF use, increasing primary care touchpoints) may not align with the TEAM hospital's episode cost optimization strategy. Conversely, hospitals participating in AHEAD Model states have a specific carveout. Hospitals in Maryland are categorically excluded from TEAM participation — an important boundary condition for multi-state health systems evaluating their mandatory exposure across CBSAs.