Here’s what healthcare organizations should know
The Centers for Medicare & Medicaid Services’ (CMS) 2025 Hospital Inpatient Prospective Payment System (IPPS) was finalized in August. The final rule will have significant implications. It covers many bases, but one of the most talked-about components is a new, mandatory five-year, episode-based payment model.
Called the Transforming Episode Accountability Model (TEAM), it aims to reduce fragmented care and its associated costs by holding select acute care hospitals accountable for ensuring coordinated, high-quality services.
Adam Bruggeman, M.D., Chief Medical Officer at PSN Affiliates and a HealthTrust Physician Advisor, explains the implications of this development. “Hospitals will only have 16 months to get ready for this,” he says. “They need to think about and prepare their discharge planners and social workers for this change and identify resources in the community to partner with to ensure they’re meeting all the cost and quality targets for their specific region.”
Here’s what healthcare organizations should know about the new rule.
What is TEAM?
TEAM is a five-year, episode-based payment model targeting high-expenditure, high-volume surgeries performed at acute care hospitals’ inpatient and outpatient departments in five focus areas: lower extremity joint replacement, surgical hip femur fracture treatment, coronary artery bypass graft, major bowel procedure and spinal fusion. The new model begins Jan. 1, 2026, and ends Dec. 31, 2030.
Which hospitals are included?
The final rule specifies 188 Core-based Statistical Areas that have been chosen for the mandatory model. Holly Moore, MSN, CCRN-K, Senior Director, HealthTrust Clinical Services, explains that CMS will require hospitals in those geographic regions across the country to participate in the model. CMS is also allowing hospitals that are not located in the selected CBSAs and that are already participating in Comprehensive Care for Joint Replacement (CJR) Model or Bundled Payment for Care Improvement (BPCI) Advanced Model have a one-time voluntary opt-in.
How does THE TEAM MODEL work?
The model is focused on a 30-day period, beginning with the procedure in the hospital, and encompasses all of the services and care under Medicare Part A and Part B that take place in the month that follows.
Scenario: A patient has total hip arthroplasty as an inpatient procedure, triggering the beginning of the 30-day episode. During those 30 days, that patient is transferred to a rehab facility for a short period. After discharge from the rehab facility, the patient requires home healthcare services for physical therapy, durable medical equipment and physician follow-up appointments.
All the medical care that this patient received in those 30 days is included in the episode. CMS will review the episode and determine if the costs and quality of care meet the cost and quality targets for that region, says Moore. “Hospitals that meet cost and quality targets will receive a positive reconciliation payment at the end of each year,” she adds. “If it costs more to provide care than their target price, or their composite quality score is suboptimal, then they may owe Medicare money for providing care that’s below expectations for their region.”
CMS is using a graduated risk format to ease participants into the full-risk levels of the model, explains Dr. Bruggeman. Track 1 in the first year of the program has lower reward levels but no penalties. Track 2 (years two to five) offers lower levels of risk and lower levels of reward for a subset of hospitals, such as safety net hospitals. Track 3, which will be available for the entire five years, has the highest levels of risk and reward.
If hospitals so choose, they can arrange to share their positive (gainsharing) or negative (alignment) reconciliation payment with team collaborators—skilled nursing and rehab facilities, primary care providers and others—but that is not a requirement, says Moore. Hospitals that choose to do so must follow applicable regulations.
What preparation is needed?
Because most patient care in the episode period will take place outside of the acute care setting and out of the direct control of hospitals, hospitals must examine their internal resources and potential partners now, says Dr. Bruggeman. “The primary cost drivers in the TEAM model will be physicians’ decisions about appropriateness for surgery, modifiable risk factors, management of comorbid conditions and postoperative accessibility. Given that hospitals have minimal control over those drivers, facilities will need to attract high-quality local, regional and national partners.”
Contact HealthTrust’s Clinical Services team with questions on the rule or share your thoughts on the HealthTrust Huddle.
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