Hospitals required to participate in the Transforming Episode Accountability Model (TEAM) beginning January 1, 2026, have been eagerly awaiting the publication of the 2026 Medicare Inpatient Prospective Payment System (IPPS) proposed rule to see what changes, if any, the Centers for Medicare & Medicaid Services (CMS) would make to TEAM. Some were hoping for significant changes, e.g., reductions in the number of participating hospitals, revisions to the list of impacted episodes, limits on hospitals’ risk exposure, and expanded waivers of the fraud and abuse laws.
With CMS’ publication of the 2026 IPPS proposed rule on April 11, these hopes were dashed. The proposed rule includes a dozen relatively minor changes to TEAM intended to clean up some loose ends. It seems the Trump Administration will push forward with mandatory alternative payment models to reduce Medicare spending.
Here is a brief summary of the 12 proposed TEAM changes:
1. Limited deferment period for new hospitals.
Any new hospital (i.e., a hospital with a CMS Certification Number with an initial effective date after December 31, 2024, but excluding any new hospital that is created as part of a reorganization event as defined at 42 CFR § 512.505) or any hospital that begins to meet the definition of TEAM participant (e.g., hospital terminates participation in the Rural Community Hospital Demonstration program) after December 31, 2024, will have at least one full performance year of participation deferment.
2. Track 2 participation eligibility for hospitals currently designated as Medicare Dependent Hospitals (MDH).
TEAM participants classified as MDHs will still be eligible for Track 2 participation if the MDH program is active at the time that participation track selections are due to CMS. Stated another way, subsequent discontinuation of the MDH program would not impact such eligibility.
3. Adding the Information Transfer Patient Reported Outcome-based Performance Measure (Information Transfer PRO-PM).
Starting in Performance Year 3 (2028), this quality measure will be added for all episodes anchored by an outpatient procedure.
4. Applying neutral quality measure score for hospitals with insufficient quality data.
For purposes of calculating a hospital’s Composite Quality Score, CMS will assign a scaled quality measure score of 50 when a TEAM participant has no or an incomplete raw quality measure score for a given quality measure.
5. Methodology to construct target prices to account for coding changes.
CMS will apply a standard, three-step approach to account for MS-DRG and HCPCS/APC changes by remapping and adjusting relevant MS-DRG/HCPCS episode types during the baseline period to estimate performance year costs.
6. Reconstructing the normalization factor and prospective trend factor.
This will be accomplished by revising the definitions (a) for prospective normalization factor to mean the multiplier incorporated into the preliminary target price to ensure that the average of the total risk-adjusted benchmark price does not exceed the average of the total non-risk adjusted benchmark price, and (b) for final normalization factor to mean the benchmark price for each MS-DRG/HCPCS episode type and region divided by the mean of the risk-adjusted benchmark price for the same MS-DRG/HCPCS episode type and region.
7. Replacing the Area Deprivation Index with the Community Deprivation Index.
The construction of the social need risk adjustment factor for beneficiary-level risk adjustment will be based on the methodology used in the ACO REACH program.
8. Lookback period and Hierarchical Condition Categories (HCC) version 28 for beneficiary risk adjustment.
The current 90-day lookback period will expand to 180 days, and the list of episode category specific HCC risk adjusters used in TEAM’s risk adjustment will be updated using HCC version 28 (as opposed to HCC version 22).
9. Aligning the date range used for episode attribution.
An episode with an anchor hospitalization beginning in a given baseline year and an anchor hospitalization discharge date in the subsequent baseline year will be attributed to the baseline year when the anchor hospitalization discharge date occurred.
10. Removing voluntary health equity plan submission and health-related social needs data reporting.
According to CMS, hospitals should focus on care redesign rather than spend resources on collecting and reporting health equity plan information or health related social needs data
11. Expanding the Skilled Nursing Facility (SNF) 3-Day Rule Waiver.
TEAM participants will be able to use the TEAM SNF 3-day rule waiver for TEAM beneficiaries discharged to hospitals and critical access hospitals providing post-acute care under swing bed arrangements, in addition to SNFs with a CMS Five-Star Quality Rating System rating of at least 3 stars in 7 of the past 12 months.
12. Removing the Decarbonization and Resilience Initiative (DRI).
According to CMS, retaining the DRI in TEAM is not in the best interest of the agency or providers participating in the model.
CMS is soliciting comment, but not proposing specific changes, in the following policy areas:
- Indian Health Service hospital outpatient episodes.
- Criteria for defining low volume hospitals exempt from downside risk.
- Standardized prices and reconciliation amounts.
- Primary care services referral requirement.
Comments on the 2026 IPPS proposed rule, including the TEAM provisions, are due June 10, 2025.
