TEAM is Here, and Hospitals Are Running Out of Time to Prepare

Transforming Episode Accountability Model (TEAM), the most expansive mandatory alternative payment model (APM) to come out of the Centers for Medicare and Medicaid Services (CMS), officially launched on January 1, 2026. It represents a significant shift to bundled payments and offers substantial opportunity to improve care and lower costs. But the potential benefits come with a caveat: analyses show that a majority of hospitals mandated to participate are likely to lose money when downside risk becomes part of the program in 2027 if they don’t make any changes to the way they currently operate in the five designated TEAM episodes of care.

There is also good news. Organizations can take steps now, in the early months of the program, to position themselves for success by evaluating past performance, identifying opportunities for improvement, and implementing episode-driven clinical and operational workflows. Optimizing early will provide a competitive advantage, and a greater chance to reap the upside rewards and avoid the downside penalties in TEAM. 

Why do many TEAM participants remain unprepared? Here are three common themes I have seen emerging in conversations with industry experts, hospitals, and physician leaders.

Reason #1: Relying too much on past bundles experience & performance

Many hospitals are relying on past experience with bundled payments, assuming it will automatically translate to TEAM success. Certainly, having some experience with bundled payments helps, but hospitals must understand that there are critical differences between prior models, such as the Bundled Payment for Care Improvement (BPCI), and TEAM. 

Two key changes include:

• Benchmarking: Prior bundled payment programs set benchmarks based on past individual performance. This created a difficult situation for high performers, who found it increasingly challenging to beat their own cost and quality targets year after year. TEAM sets targets based on regional benchmark pricing in nine census divisions. While this eliminates the competition against yourself, it introduces the challenge of competing with other potentially high-performing sites and surgeons in your region. 
• Timelines: TEAM shortens the post-acute window from 90 days (typical for previous bundled payment programs) to just 30 days. This forces hospitals and surgeons to focus on surgical quality, initial hospitalization, and care transitions to reduce costs.

Both of these changes require a new approach. Cost benchmarks will now be a moving target as other participants in the region improve their performance, and cost reduction strategies for a 90-day post-acute timeframe in programs may not move the needle in TEAM. 

Reason #2: Planning 2026 as a “practice” year

TEAM hospitals know that they won’t be penalized for missing cost and quality targets during the 2026 performance year, and some may still be tempted to wait and see how their early performance shapes up before making changes in 2027. The pitfall in this approach is underestimating how much time it takes for changes to materially impact future program performance. 

Identifying levers available to improve cost and quality, designing and implementing effective workflows, and monitoring outcomes to determine whether they had the anticipated impact (and if not, making additional tweaks and improvements) could take several months to a year. Hospitals and providers that wait until early 2027 to start implementing changes could risk missing the mark in 2027 as well, and getting hit with downside penalties up to 20%.

Reason #3: Competing priorities & missing the broader strategic alignment

With just five initial procedures included in TEAM, some hospitals may not see the potential downside risk — in total dollars, or as a percent of their bottom line — as material enough to devote significant resources to preparing for program launch. Hospitals already face an array of financial pressures, from emergency department boarding and throughput challenges to workforce shortages and post-acute placement delays. 

But this misses two critical points. First, CMS has signaled its intent to expand the list of procedures in TEAM, which will put additional financial pressure on hospitals that have not devoted appropriate time and resources to developing effective workflows and processes for episodes of care from the start. Experts predict that expansion could come as early as 2027, so hospitals waiting out the first year could find themselves even farther behind at the start of the second performance year.

Second, putting in the effort now to optimize TEAM and bundles performance could translate to success in addressing other clinical and financial priorities. Bundles have proven effective at addressing rising costs and enhancing patient experiences in many Centers of Excellence around the country. Proficiency in TEAM bundled payments could also translate into additional opportunities beyond CMS — including in the commercial market — to launch prospective bundles for multiple high-cost, high-volume procedures.

Specifically, bundled payments can address cost and quality by: 

• Improving surgical quality and efficiency by avoiding unnecessary consultations, optimizing operating room efficiency, and reducing avoidable complications and surgical errors
• Enhancing care transitions through seamless discharge planning and patient care follow-up workflows, strong partnerships with post-acute care facilities, and minimizing avoidable readmissions
• Incentivizing more collaboration among providers and facilities involved in an episode of care — from pre-procedure consultations through surgery and post-discharge care
• Shifting appropriate procedures to more cost-effective sites, such as hospital outpatient facilities
• Minimizing site-to-site or provider-to-provider cost variations, and over-reliance on unnecessary services, such as inpatient rehabilitation

Some of the longest-running prospective bundled payment programs in the nation have demonstrated that bundles are a viable option for providing exceptional care at a lower cost. TEAM participants can take critical lessons from established models in three key areas: people, processes, and technology. 

First, physician champions are essential to succeed in any major transition, particularly for programs like TEAM that will fundamentally shift decades of fee-for-service behavior to a value-based care model. These champions can drive cultural change toward shared accountability, engage every member of the care team, and collaborate with finance, IT, and other departments that will contribute to bundled payment success. 

Second, organizations must invest time and effort to develop the processes that will lead to better coordination in episodes of care. That includes identifying the episodes, building appropriate and efficient care pathways, planning for care transitions, preventing readmission, and soliciting feedback from providers and care teams to improve the processes over time.

Finally, TEAM hospitals (and any organization planning to participate in CMS-driven or commercial bundled payment models) need a strong technology and services partner to design, implement, monitor, and optimize the program. Technology platforms must include extensive analytics insights with modeling and drill-down capabilities so everyone can identify the levers they have available to contribute to lower costs and better care quality, seamless workflow management through integrated care and analytics applications, and claims administration technology that can easily bundle and unbundle claims tied to an episode. 

Transitioning from fee-for-service to value-based care takes time. It won’t happen in days or weeks, but will take months to successfully implement and optimize. Early movers that refine and strengthen their TEAM strategy will be well positioned for the next wave of bundled APMs, whether in the expansion of episodes in TEAM, new CMS mandatory models, or commercial payers designing their own programs. 

TEAM is now the active forcing function today in the shift toward bundled payments and APMs broadly, but it won’t be the end. With preparation, deep physician engagement, strong collaborative partnerships, and advanced technology that supports APMs, organizations can avoid the downside risk in TEAM now and position themselves as competitive leaders for whatever the future brings.

Correction: An earlier version misstated the nature of the APM.

Photo: Andriy Onufriyenko, Getty Images

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