CMS TEAM Model & Its Impact On Surgical Episode Reimbursement

The CMS TEAM Model fundamentally alters how Medicare pays for surgical care, replacing traditional fee-for-service with episode-based bundled payments starting January 1, 2026. This mandatory program affects 741 hospitals across 76 metropolitan areas, bundling all surgical costs into single payments that cover 30 days post-discharge. Hospitals face financial risk as they become accountable for both costs and quality outcomes during these episodes.

How Does the CMS TEAM Model Change Surgical Reimbursement?

The TEAM Model CMS replaces individual service billing with predetermined episode payments. The bundled payment will cover all items and services covered under Medicare Part A and B during the 30-day episode period.

CMS sets target prices for each surgical episode based on historical data and regional factors. Hospitals receive this fixed amount regardless of the actual services provided during the episode.

TEAM covers these five procedures:

• Coronary artery bypass grafting
• Hip and femur fracture repairs
• Lower extremity joint replacement
• Spinal fusion
• Dialysis shunt procedures

What Are Episode-Based Payments?

Episode-based payments bundle all costs related to a surgical procedure into one payment. Participating hospitals would receive a target price to cover all costs associated with a 30-day episode of care from admission through discharge, plus 30 days.

This includes:

• Hospital facility costs
• Physician services
• Post-acute care
• Readmissions
• Complications

How Are Target Prices Calculated Under the TEAM Model CMS?

CMS calculates target prices using historical Medicare spending data for each procedure type. Hospitals that meet the quality threshold can receive up to a 10% increase in any positive NPRA earned or a reduction of up to 15% in any negative NPRA based on their quality performance.

Target price factors include:

• Regional wage adjustments
• Hospital case mix
• Historical episode costs
• Quality performance scores

CMS updates these prices each year using Medicare cost data and economic factors.

What Financial Risks Do Hospitals Face?

Hospitals lose money when episode costs exceed target prices. A single complicated case can wipe out profits from multiple successful episodes. If hospitals spend less than the target price and meet quality standards, they will receive a payment from Medicare. However, if they spend more than the target price, they will owe Medicare a repayment.

Financial outcomes depend on cost management:

• Under target spending: Shared savings payments
• Over target spending: Repayment obligations to CMS
• Quality failures: Reduced payments or increased penalties

Poor quality scores can eliminate shared savings entirely.

How Do Quality Measures Affect Reimbursement?

The Medicare TEAM Model directly ties payments to quality performance through composite quality scores (CQS). Under the TEAM program, participant performance on quality measures will influence their composite quality score (CQS), which in turn directly affects payment reconciliation at the end of each performance year.

Quality measures include:

• Care coordination metrics
• Patient safety indicators
• Patient-reported outcomes
• Readmission rates
• Complication rates

Perhaps the most unique update in this proposed model is the direct tying of reimbursement to quality measures as reported by patients themselves via PROs. This patient feedback directly impacts hospital payments.

Implementation Challenges

Hospitals will experience the most direct impact. Through the hospitals' required participation in the TEAM model, they will assume financial responsibility for "episodes" and may have to facilitate physician change management and make operational updates as a result.

Major challenges include:

• Care coordination across multiple providers
• Post-discharge monitoring systems
• Quality data collection and reporting
• Physician alignment and engagement
• Technology system integration

How Can Hospitals Profit from TEAM?

Hospitals that control episode costs while maintaining quality earn shared savings. The key is preventing complications and readmissions.

Benefits include:

• Reduced unnecessary services
• Better care coordination
• Improved patient satisfaction
• Shared savings opportunities
• Enhanced quality metrics

Final Call

The CMS TEAM Model eliminates fee-for-service billing for surgical episodes. Hospitals now get paid once per episode, not for each service provided. Preparation is critical. Hospitals need episode tracking systems, care coordination protocols, and quality monitoring tools before January 2026.

Transform your surgical episode management with confidence. 

Persivia offers comprehensive healthcare analytics platforms that help hospitals optimize episode-based care delivery and maximize performance under the CMS TEAM Model. Our solutions provide real-time episode cost tracking, quality measure monitoring, and care coordination insights that drive better outcomes and financial performance.

Don’t navigate episode-based payments alone. Partner with Persivia and turn the CMS TEAM Model into a competitive advantage for your hospital.

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