Here are five key strategic considerations hospital leaders should evaluate:
- Financial Risk Structure Demands Early Preparation. While TEAM provides a one-year “glide path” with no downside risk in 2026, most hospitals must transition to two-sided risk by 2027. Analysis from the Institute for Accountable Care shows potential losses could average $1,350 per episode for hospitals with current above regional benchmarks. Hospital leaders must now analyze their historical costs against regional targets to understand their risk exposure.
- Regional Pricing Creates Winners and Losers. Unlike previous bundled payment models where targets incorporated each hospital’s historical costs, TEAM sets prices based on regional averages. Research published in AJMC indicates the model’s initial financial impact varies substantially across markets – from potential gains of $915 per case in Minneapolis to losses of $1,350 per case in Denver. This regional pricing approach creates financial transfers from higher-cost urban centers to lower-cost communities and hospitals.
- Effective Post-Acute Care Management is Critical. Although the TEAM’s 30-day episodes are shorter than prior programs with 90-day bundles, post-acute spending still represents 15-55% of total episode costs, depending on the type of procedure. It is the largest spending variation across providers. Successful hospitals will need to develop care navigation programs and post-acute partnerships.
- Quality Performance Directly Impacts Economics TEAM links up to 10% of savings and 15% of losses to performance on readmissions, patient safety, and patient-reported outcomes measures. The model’s Composite Quality Score methodology means hospitals must excel on all measures to maximize financial benefit. This creates a clear imperative for comprehensive quality improvement programs.
- Health Equity Requirements Expand Beyond Previous Models Beyond standard quality metrics, TEAM requires screening for health-related social needs and referral to primary care services. The model also includes social risk adjustment factors in target prices. This expanded emphasis on equity signals CMS’s growing focus on addressing disparities through payment models.
Looking ahead
TEAM represents a bold step toward making episode-based payment a permanent feature of hospital reimbursement. The model’s mandatory participation, regional pricing approach, and expanded quality requirements create urgency for hospitals to develop comprehensive strategies across clinical, operational, and financial domains.
To be successful, hospitals must:
- Build robust data analytics capabilities
- Invest in physician education and alignment
- Optimize post-acute care partnerships and networks
- Enhance care navigation programs
- Develop comprehensive quality improvement initiatives
With less than two years until implementation, hospital leaders should begin preparing now for this significant shift in payment methodology.
This analysis is supported by research from the Institute for Accountable Care.
Karen Marie Joswick is a faculty member at the College of Population Health at Thomas Jefferson University. Robert Mechanic is executive director at the Institute for Accountable Care.
