Clock ticks for hospitals as TEAM bundled payment model nears

Modern Healthcare – Thursday, August 14, 2025
By Bridget Early

With just four months to go until a new, mandatory Medicare payment model commences, the hospital sector may be behind schedule.

Health systems must ready themselves for the Transforming Episode Accountability Model, a five-year bundled payment demonstration known as TEAM, which sets episode-based fee-for-service Medicare reimbursements for five common procedures at nearly 750 hospitals.

The Centers for Medicare and Medicaid Services finalized the model, which goes live on Jan. 1, in its 2025 hospital inpatient payment rule. TEAM will test bundling payments for 30-day episodes of care for lower-extremity joint replacements, femur fracture surgeries, spinal fusions, coronary artery bypass grafts and major bowel procedures.

Healthcare analysts are concerned the industry isn’t far enough along in its preparations. Those include conducting thorough evaluations of spending patterns and historical costs, coordinating with post-acute care providers, and determining discharge strategies.

Some hospitals haven’t even started assessing data, said Brian Fuller, a managing director in ATI Advisory’s value-based care design and delivery practice, which counsels providers on TEAM implementation.

There are several reasons hospitals could be behind, Fuller said. Some hoped President Donald Trump’s administration would cancel, postpone or modify the model when they took over from President Joe Biden’s administration, which originated TEAM last year.

But CMS only finalized small tweaks, such as removing downside risk for low-volume hospitals that do not record at least 31 episodes of care in a given category.

In the meantime, hospitals have been hit with an onslaught of major policy changes, such as the Medicaid cuts in Trump’s tax bill and a set of site-neutral and overpayment clawback policies in this year’s hospital outpatient proposed rule.

And hospitals are navigating workforce, supply chain and tariff challenges, Fuller said.

“All of that just increasingly subsumes the attention of hospital leaders,” Fuller said. “We’ve definitely been surprised — particularly as we’ve gotten further into the year and we’re now four months away from ‘go live’ — that we haven’t seen kind of more readiness across the marketplace.”

At this point, hospitals should be well underway with data analysis that informs how they revise internal workflows and make arrangements with post-acute providers, Fuller said.

Ideally, the fourth quarter should be focused on operational and administrative elements of TEAM, such as finalizing complex model participation agreements with CMS, Fuller said.

Tardy providers need to prioritize data analysis, which will help them identify partners and assess existing relationships to ensure there aren’t overlapping financial incentives, said Angie Caldwell, a principal at PYA Accountants and Advisors, an accounting and healthcare consulting firm.

That could include unwinding existing agreements, said Carol Carden, managing principal of compensation, valuation, planning and design at PYA.

While hospitals can elect to only take on upside risk during the TEAM’s first year, unpreparedness, even in upside-only arrangements, means they could miss out on potential profits, according to both Fuller and Caldwell.

CMS has also stated it may add new care episodes to the model, Fuller said. Providers that aren’t fully prepared for the first five episodes might flounder if regulators include more procedures, he said. Those additions would likely come early on, possibly as soon as next year, as the agency will prioritize testing those episodes for as long as possible, he said.

Groups such as the American Hospital Association have repeatedly called on regulators to make the model voluntary.

“Hospitals and health systems are eager for opportunities to participate in value-based payment arrangements and to drive innovation in the Medicare program,” Ashley Thompson, senior vice president, public policy analysis and development for the AHA, wrote to CMS on June 10.

“However, we continue to be concerned that TEAM does not meet these desired goals and may, in fact, hamper access to care by overburdening providers who do not have the infrastructure or population to be successful in this model, the way it is currently designed.”

Some hospitals are in a better position. Mara McDermott, CEO of Accountable for Health, said value-based care participants, especially those with expertise with other bundled payment models, are in good shape ahead, largely because of their experience managing key preparatory steps.

For TEAM participants that aren’t in value-based care arrangements already, the new model could offer lessons that would make it easier to join other models, McDermott said.

Former Veterans Affairs Secretary Dr. David Shulkin, who sits on the board for Sioux Falls, South Dakota-based Sanford Health, said CMS’ decision to carry over a Biden-era program signals the agency is serious about pushing providers to take greater clinical and financial responsibility.

“Hospitals that did not get selected in this program should not be ignoring this,” Shulkin said. “This is a signal of things to come. These are skills and toolsets that hospitals should be thinking about developing and sharpening up, whether they’re in the TEAM model or not, because this is really where healthcare is headed.”

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