CMS Proposes Key Updates to the TEAM Model Under the New IPPS Proposed Rule

In the Inpatient Prospective Payment System (IPPS) Proposed Rule for the 2026 fiscal year (FY), the Centers for Medicare & Medicaid Services (CMS) announced updates to the Transforming Episode Accountability Model (TEAM).

This Model, discussed in prior articles, is a new mandatory alternative payment model scheduled to start Jan. 1, 2026.

TEAM will run through Dec. 31, 2030, and will test whether an episode-based payment approach tied to quality metrics can reduce Medicare expenditures while maintaining or improving care quality for beneficiaries.

TEAM will focus on five surgical episode categories: coronary artery bypass graft (CABG) surgery, lower extremity joint replacement, major bowel procedures, surgical hip/femur fractures, and spinal fusion. In the FY 2026 proposed rule, CMS has introduced several key modifications designed to adjust TEAM’s structure ahead of its performance start date. The changes include the following:

• Limited Deferment Period: Certain hospitals may be granted a temporary deferment from TEAM participation based on specific criteria, such as new hospitals, purchased-acquired hospitals, or data adjustments through the program period that would put a particular hospital in the program via qualifying core-based statistical area.
• Track 2 Eligibility Alignment: Hospitals designated as Medicare Dependent Hospitals (MDHs) will have participation eligibility linked to the expiration of the MDH program itself. Per the proposed ruling, there are about 25 MDHs in TEAM.  A total of 21 of those are Track 2 eligible for being either a safety net, rural community, or sole community hospital.
• Finalized Quality Measures: The addition of the Information Transfer Patient Reported Outcome-based Performance Measure (Information Transfer PRO-PM) aims to strengthen patient-reported outcome tracking.

• Neutral Quality Measure Submission Option: TEAM participants that submit insufficient or low volumes of data will now receive a neutral quality measure score of 50 on a scale ranging from 1-100, to avoid being penalized.
• Target Price Construction for Coding Changes: A recommendation has been proposed to adjust target pricing structures when procedural coding changes occur during the model period. CMS will also reconstruct the normalization factor and prospective trend factor used in financial benchmarks throughout the program period.
• Shift in Calculations: TEAM will replace the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI), which is consistent with the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) model calculations.
• HCC lookback period: CMS proposes a similar adjustment to lessons learned from the bundled payment program to adjust the lookback period for Hierarchical Condition Codes (HCCs) to 180 days, instead of 90, with HCC v28.
• Removal of Health Equity: The updated ruling has removed any mandatory and voluntary data tracking and reporting for health-related social needs or health equity data.
• Adjustment of labels from gender to sex: For data reported, TEAMS participants will be required to submit the binary sex labels of surgical patients, rather than the previous term of gender.
• SNF Three-Day Waiver: The ruling proposes including the SNF three-day waiver for TEAM members to skilled nursing facilities (SNFs) that meet the CMS Star Rating requirements of 3 stars or better. The proposal noted that swing beds are excluded from this waiver; thus, patients in TEAM will not be eligible to transfer to a swing bed under the waiver program.
• Removal of the Decarbonization Initiative: CMS has also withdrawn the proposed Decarbonization and Resilience Initiative from the model.

Additionally, CMS is seeking public comment (but not proposing changes yet) regarding Indian Health Service (IHS) hospital outpatient episodes, low-volume hospitals, the use of standardized prices and reconciliation amounts, and primary care service referral requirements.

Through these updates, CMS aims to strengthen TEAM’s focus on driving quality improvement and cost reduction across surgical episodes. The Proposed Rule describes these revised changes as a continued effort to “promote fairness in performance assessment, and ensure a more seamless transition for hospitals into value-based payment models.

Hospitals impacted by TEAM should carefully review these proposed changes and consider submitting comments before the final rule is issued.

Programming note:

Listen live when Tiffany Ferguson reports this story today during Talk Ten Tuesday with Chuck Buck and Angela Comfort.