CMS Proposes New Mandatory Value-Based Payment Initiative: The Transforming Episode Accountability Model

Firm Publication

The Centers for Medicare & Medicaid Services (CMS) recently proposed the Transforming Episode Accountability Model (TEAM) – a new, mandatory, episode-based alternative payment model in the Fiscal Year 2025 Hospital Inpatient Prospective Payment System (IPPS) proposed rule. Incorporating lessons learned from prior and current episodic models such as the Bundled Payment for Care Improvement Advanced (BPCI-A) and Comprehensive Care for Joint Replacement (CJR) models, TEAM seeks to incentivize care coordination, improve patient transitions, and decrease the risk of avoidable readmissions for beneficiaries who receive services covered under applicable episodes. The TEAM model is proposed to begin on January 1, 2026, and end on December 31, 2030.

Included Participants and Episodes

If CMS’s proposal is finalized as written, TEAM participation would be mandatory for all acute care hospitals paid under the IPPS that are located within certain randomly-selected core-based statistical areas (CBSAs). While the model is expected to capture hospitals from across the United States, hospitals in Maryland will be excluded due to their participation in the ongoing Maryland Total Cost of Care Model.

Participating hospitals would assume the risk for certain episodes of care involving lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure. Episodes would generally begin upon hospitalization for the relevant procedure and end 30 days after the beneficiary is discharged from the hospital. The model would also require hospital participants to refer patients to primary care providers upon discharge to support continuity of care and improve positive long-term outcomes.

TEAM Economics

If TEAM is finalized as proposed, CMS will pay hospitals a “target price” that represents most Medicare Parts A and B spending during an episode, including the relevant surgery, inpatient stay (or outpatient procedure), and post-acute care (e.g., skilled nursing facility (SNF) stays), follow-up visits, and other relevant items and services following discharge. The target price would be risk-adjusted based on patient-level risk factors, including “social risk,” and would be rebased annually. In addition, CMS would reconcile payments and assess participant performance in TEAM annually. Based on those annual results, participants may earn a positive performance payment or owe CMS a repayment amount, depending on the following factors:

  1. The participant’s applicable participation track (as discussed below).
  2. How total Medicare costs for the episode compare to the target price.

Notably, unlike BPCI-A and CJR, CMS proposes to allow provider and individual overlap with most other CMS models and initiatives. For example, CMS would not adjust a participant’s reconciliation payment or repayment amount when there are beneficiaries who fall within TEAM and accountable care organization initiatives.

Participation Tracks

CMS proposes to include three tracks in TEAM, each with different financial risk and quality performance adjustments:

  • Track 1 would not require hospitals to bear any downside risk and would include reduced levels of reward capped by a 10% “stop-gain limit.”
  • Track 2 would be associated with lower levels of upside and downside risk, involving 10% limits on gains and losses. This track would be available only to certain hospitals, including safety net hospitals and rural hospitals.
  • Track 3 would involve a higher financial risk model with 20% limits on gains and losses for applicable performance years (PY).

Although CMS offers the opportunity for hospitals not to bear any downside risk in Track 1, Track 1 would be available only in PY1; all those who choose it would automatically shift to Track 3 in PY2 and would remain in Track 3 for the remainder of the model. Certain other hospitals would be allowed to begin participation in Track 2 beginning in PY2 and either stay in Track 2 for the remainder of the model or switch to Track 3 in a later PY.

Model Flexibilities

In order to help further TEAM model goals, such as care coordination and improved care transitions, CMS proposes to make the CMS-sponsored model arrangements safe harbor available to protect certain financial arrangements and beneficiary incentives. Namely, if the rule is finalized as proposed, the safe harbor could protect:

  • Financial arrangements between TEAM participants and physicians, group practices, and other providers that involve gainsharing or downstream distribution payments. Protection would also extend to “alignment payments” made by such providers when sharing in a TEAM participant’s repayment to CMS.
  • In-kind beneficiary engagement incentives offered by TEAM participants, such as technologies that, among other things, are “closely related to the provision of high-quality care” and “advance a clinical goal for a TEAM beneficiary.”

CMS also expects to include Medicare waiver flexibilities as part of TEAM, including a waiver of certain telehealth requirements (to allow, for example, certain virtual visits to originate in a patient’s home for services included in an episode). In addition, CMS proposes to waive the SNF 3-day rule for coverage of a stay at a qualified SNF that occurs within 30 days of discharge from the relevant hospitalization.

Decarbonization and Resilience Initiative

Notably, TEAM marks the first CMS Innovation Center model to include a Decarbonization and Resilience Initiative (Initiative). Pursuant to this Initiative, CMS contemplates participants voluntarily reporting on emissions and CMS providing technical assistance to help participants improve their decarbonization strategies over time, including how a hospital might identify, pay for, and implement energy efficiency improvements. Those choosing to participate in this Initiative would receive acknowledgment of their participation on a CMS public-facing website. CMS has signaled that similar activities may be considered for other models in the future, including models that have already been announced.

CMS is accepting comments on the proposed rule until 5:00 p.m. ET on June 10, 2024. If you have any questions about TEAM or submitting comments to the proposed rule, please contact the authors.

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Related Services
Firm Publication

The Centers for Medicare & Medicaid Services (CMS) recently proposed the Transforming Episode Accountability Model (TEAM) – a new, mandatory, episode-based alternative payment model in the Fiscal Year 2025 Hospital Inpatient Prospective Payment System (IPPS) proposed rule. Incorporating lessons learned from prior and current episodic models such as the Bundled Payment for Care Improvement Advanced (BPCI-A) and Comprehensive Care for Joint Replacement (CJR) models, TEAM seeks to incentivize care coordination, improve patient transitions, and decrease the risk of avoidable readmissions for beneficiaries who receive services covered under applicable episodes. The TEAM model is proposed to begin on January 1, 2026, and end on December 31, 2030.

Included Participants and Episodes

If CMS’s proposal is finalized as written, TEAM participation would be mandatory for all acute care hospitals paid under the IPPS that are located within certain randomly-selected core-based statistical areas (CBSAs). While the model is expected to capture hospitals from across the United States, hospitals in Maryland will be excluded due to their participation in the ongoing Maryland Total Cost of Care Model.

Participating hospitals would assume the risk for certain episodes of care involving lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure. Episodes would generally begin upon hospitalization for the relevant procedure and end 30 days after the beneficiary is discharged from the hospital. The model would also require hospital participants to refer patients to primary care providers upon discharge to support continuity of care and improve positive long-term outcomes.

TEAM Economics

If TEAM is finalized as proposed, CMS will pay hospitals a “target price” that represents most Medicare Parts A and B spending during an episode, including the relevant surgery, inpatient stay (or outpatient procedure), and post-acute care (e.g., skilled nursing facility (SNF) stays), follow-up visits, and other relevant items and services following discharge. The target price would be risk-adjusted based on patient-level risk factors, including “social risk,” and would be rebased annually. In addition, CMS would reconcile payments and assess participant performance in TEAM annually. Based on those annual results, participants may earn a positive performance payment or owe CMS a repayment amount, depending on the following factors:

  1. The participant’s applicable participation track (as discussed below).
  2. How total Medicare costs for the episode compare to the target price.

Notably, unlike BPCI-A and CJR, CMS proposes to allow provider and individual overlap with most other CMS models and initiatives. For example, CMS would not adjust a participant’s reconciliation payment or repayment amount when there are beneficiaries who fall within TEAM and accountable care organization initiatives.

Participation Tracks

CMS proposes to include three tracks in TEAM, each with different financial risk and quality performance adjustments:

  • Track 1 would not require hospitals to bear any downside risk and would include reduced levels of reward capped by a 10% “stop-gain limit.”
  • Track 2 would be associated with lower levels of upside and downside risk, involving 10% limits on gains and losses. This track would be available only to certain hospitals, including safety net hospitals and rural hospitals.
  • Track 3 would involve a higher financial risk model with 20% limits on gains and losses for applicable performance years (PY).

Although CMS offers the opportunity for hospitals not to bear any downside risk in Track 1, Track 1 would be available only in PY1; all those who choose it would automatically shift to Track 3 in PY2 and would remain in Track 3 for the remainder of the model. Certain other hospitals would be allowed to begin participation in Track 2 beginning in PY2 and either stay in Track 2 for the remainder of the model or switch to Track 3 in a later PY.

Model Flexibilities

In order to help further TEAM model goals, such as care coordination and improved care transitions, CMS proposes to make the CMS-sponsored model arrangements safe harbor available to protect certain financial arrangements and beneficiary incentives. Namely, if the rule is finalized as proposed, the safe harbor could protect:

  • Financial arrangements between TEAM participants and physicians, group practices, and other providers that involve gainsharing or downstream distribution payments. Protection would also extend to “alignment payments” made by such providers when sharing in a TEAM participant’s repayment to CMS.
  • In-kind beneficiary engagement incentives offered by TEAM participants, such as technologies that, among other things, are “closely related to the provision of high-quality care” and “advance a clinical goal for a TEAM beneficiary.”

CMS also expects to include Medicare waiver flexibilities as part of TEAM, including a waiver of certain telehealth requirements (to allow, for example, certain virtual visits to originate in a patient’s home for services included in an episode). In addition, CMS proposes to waive the SNF 3-day rule for coverage of a stay at a qualified SNF that occurs within 30 days of discharge from the relevant hospitalization.

Decarbonization and Resilience Initiative

Notably, TEAM marks the first CMS Innovation Center model to include a Decarbonization and Resilience Initiative (Initiative). Pursuant to this Initiative, CMS contemplates participants voluntarily reporting on emissions and CMS providing technical assistance to help participants improve their decarbonization strategies over time, including how a hospital might identify, pay for, and implement energy efficiency improvements. Those choosing to participate in this Initiative would receive acknowledgment of their participation on a CMS public-facing website. CMS has signaled that similar activities may be considered for other models in the future, including models that have already been announced.

CMS is accepting comments on the proposed rule until 5:00 p.m. ET on June 10, 2024. If you have any questions about TEAM or submitting comments to the proposed rule, please contact the authors.

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