With weeks left to prepare for TEAM, hospital readiness lags

Modern Healthcare – Friday, November 21, 2025
By Bridget Early

Hospitals are running out of time to prepare for a new mandatory Medicare bundled payment model, and there’s lots left to do.

Starting in January, more than 700 hospitals will be held accountable for coordinating care and constraining costs for five common procedures under a five-year bundled payment demonstration called the Transforming Episode Accountability Model, or TEAM.

The model, which the Centers for Medicare and Medicaid Services finalized last November, will test bundled payments for 30-day episodes of care in fee-for-service Medicare. TEAM covers major bowel procedures, femur fracture surgeries, spinal fusions, lower-extremity joint replacements and coronary artery bypass grafts.

“CMS has taken multiple steps to assist hospitals participating in TEAM with understanding both TEAM’s pricing methodology and how they can use data to help them succeed in the model,” a spokesperson said in a statement. “CMS provided TEAM participants with early preliminary target prices and baseline data, as well as resources including target prices, episode construction and exclusions, participation tracks, quality measures, collaboration with Medicare Accountable Care Organizations, and comparisons with the Bundled Payments for Care Improvement Advanced and Comprehensive Care for Joint Replacement models.”

But health systems are still scrambling to be prepared and must complete tasks such as evaluating historical spending patterns and implementing cost-cutting strategies.

Lagging readiness has financial implications for hospitals, particularly amid a policy environment rife with other challenges, such as the Medicaid cuts enacted in July, mounting pressure on the 340B Drug Pricing Program and pending site-neutral and overpayment clawback policies in the hospital outpatient reimbursement final rule for 2026.

“Hospitals will have to commit significant resources to implement care redesign and build out their infrastructure, all within an unreasonably compressed timeframe,” Ashley Thompson, senior vice president for policy at the American Hospital Association, wrote in an email. “This comes at a time when many hospitals are struggling in today’s challenging operating environment, especially those in rural and underserved communities. For these reasons, we continue to urge CMS to make TEAM voluntary.”

There’s broad variation in provider readiness for TEAM, with some participants well underway and others still needing to set discharge strategies and coordinate with physicians and post-acute care providers, Christine Mulheran, chief operating officer of Navvis Healthcare, which advises hospitals on TEAM, wrote in an email.

Health systems are simultaneously navigating challenges such as shifting payer mixes and consolidation, which are straining resources and decision-making capacity while hospitals try to stand up TEAM and other value-based care models, Mulheran wrote.

“The financial implications of being unprepared are real,” Mulheran wrote. “Systems that delay preparation risk avoidable readmissions, higher episode costs and lost shared-savings opportunities.”

Likewise, workforce shortages, supply chain and drug pricing pressures, and an artificial intelligence ”arms race” are stressing health systems and eroding their long-term resilience, said Brian Fuller, a managing director in the consulting company ATI Advisory’s value-based care design and delivery practice, which counsels providers on TEAM.

“There’s clearly other strategic priorities, other more pressing challenges that are taking the bandwidth of health system leadership, and I think that is largely supplanting the capacity to deal with TEAM,” Fuller said.

The financial impacts will be delayed because the first year of TEAM contains upside-only risk, meaning providers can’t lose money on these episodes in 2026, Fuller said.

“The agency believes this opportunity will help hospitals gain experience and allow them to further enhance their care redesign,” the CMS spokesperson said. “The inclusion of downside risk will be important given that downside risk is effective at driving behavior change.”

But many hospitals are starting from a financial “negative point” on those interventions, and need to use the time they have now to climb their way out of the red, he said. The Institute for Accountable Care projects hospitals could lose an average of $500 per episode of care.

If participants don’t implement strategies now that will help them lower their spending, they could suffer the consequences later, especially because TEAM’s regional benchmarks mean hospitals can significantly reduce their costs but still lose money, Fuller said.

“What you could have, if hospitals wait longer than they should, is hospitals getting hit with pretty big financial downside results in 2027, and in that case, they would owe CMS a check,” Fuller said.

TEAM participants, especially smaller and under-resourced participants, might struggle to stand up the model, Thompson wrote.

“The AHA has long supported widespread adoption of meaningful, value-based and alternative payment models to deliver high-quality care at lower costs,” Thompson wrote. “We remain concerned that TEAM will not advance these objectives and puts at particular risk hospitals that are not of a large enough size or in a position to support the investments needed to be successful.”

Moving forward, Frank Winegar, a partner in the healthcare provider market wing of the professional services company Guidehouse, said CMS could provide baseline performance data to help hospitals move more quickly. CMS should also clarify how TEAM overlaps with accountable care organizations and release templates for gainsharing policies and beneficiary notices, he said.

Correction: A previous version of this story incorrectly described Guidehouse as a lobbying firm.

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