Mandatory Medicare Model on the Horizon — Top 7 Questions Answered

• May 13, 2024
• Jennifer Boese

In its proposed 2025 inpatient prospective payment system rule (IPPS), the Centers for Medicare & Medicaid Service (CMS) is looking to require certain hospitals to participate in a new bundled payment model called Transforming Episodic Accountability Model (TEAM). 

1. What is the TEAM model?

TEAM is an episode-based model that builds on other models, such as the Comprehensive Care for Joint Replacement (CJR) and Bundled Payments for Care Improvement (BPCI Advanced) models. It will be mandatory for certain acute care hospitals in specific geographic regions. The hospital would be held financially accountable (i.e., two-sided risk) for the cost and care under the model for certain surgical procedures. It is a five-year model starting January 1, 2026, through December 31, 2030.

TEAM is part of CMS’s specialty care strategy CMS includes TEAM in the proposed IPPS rule and highlights its specialty care strategy as a reason for developing this model. The specialty care strategy consists of four elements: 1. Enhancing specialty care performance data transparency 2. Maintaining momentum on acute episode payment models and condition-based models 3. Creating financial incentives within primary care for specialist engagement 4. Creating financial incentives for specialists to affiliate with population-based models and move to value-based care

2. Which hospitals will be required to participate in TEAM?

As proposed, this would be a mandatory model requiring TEAM “participants” to participate. CMS defines a “TEAM participant” as an acute care hospital that initiates episodes and is paid under the inpatient prospective payment system (IPPS) with a CMS Certification Number primary address located in one of the geographic areas selected for participation. Only TEAM participants initiate an episode.

To determine which geographic areas to include, CMS proposes using Core-Based Statistical Areas (CBSAs), which are then stratified into groups based on average historical episode spending, the number of hospitals, the number of safety net hospitals, and the CBSA’s exposure to prior CMS bundled payment models. The result is 17 proposed strata that are divided into high and low groups. In looking at Tables TABLE X.A.-02 (CBSAs eligible for TEAM) and TABLE X.A.-03 (selection strata and possibility of inclusion) of the proposed rule, hospitals can see where their CBSA falls.

3. Are other individuals or entities allowed to participate in TEAM?

While only TEAM participants can initiate an episode, the model does account for how others will be involved. Briefly, CMS proposes a downstream participant to mean “an individual or entity that has entered into a written arrangement with a TEAM participant, TEAM collaborator, collaboration agent, or downstream collaboration agent under which the downstream participant engages in one or more TEAM activities.”

CMS defines TEAM activities broadly to mean any activity related to promoting accountability for the quality, cost, and overall care for TEAM beneficiaries and performance in the model, including managing and coordinating care; encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery; or carrying out any other obligation or duty under the model.

CMS proposes that “TEAM collaborator” will be defined as an ACO or Medicare-enrolled individuals or entities that enter into a sharing arrangement. These Medicare-enrolled types include a skilled nursing facility, home health agency, physicians, and hospitals among others.

4. What is an episode under TEAM?

An episode will begin with an anchor hospitalization or anchor procedure. An episode would last 30 days post anchor event or discharge. The TEAM model would test five surgical episode categories: coronary artery bypass graft (CABG), lower extremity joint replacement (LEJR), major bowel procedure, surgical hip/femur fracture treatment (SHFFT), and spinal fusion. See table below for specific codes that trigger an episode. 

Surgical Category	MS-DRGs, HCPCS
LEJR – hip, knee, or ankle episode	MS–DRG 469, 470, 521, or 522 or through the OPPS under HCPCS code 27447, 27130, or 27702
SHFFT – a hip/femur fracture	MS–DRG 480–482
CABG – coronary revascularization	MS– DRG 231–236, including elective CABG and CABG procedures performed during initial acute myocardial infarction treatment
Spinal fusion	MS–DRG 453-455, 459-460, or 471-473 HCPCS codes 22551, 22554, 22612, 22630, or 22633
Major bowel	MS– DRG 329-331

5. Are there different Tracks within TEAM?

Yes. CMS proposes three tracks for TEAM participants.

• Track 1 would be available only in PY 1 for all TEAM participants and would have only upside financial risk with quality adjustment applied to positive reconciliation amounts. Track 1 would have upside-only financial risk provided through reconciliation payments. These would be subject to a 10% stop-gain limit and a CQS adjustment percentage of up to 10%. CMS proposes only allowing TEAM participants to participate in Track 1 for one year, specifically PY 1.
• Track 2 would be available in PYs 2 through 5 to a limited set of TEAM participants. It would have two-sided financial risk with quality adjustment to reconciliation amounts. CMS proposes rather than automatically assigning Track 3 beginning in PY 2, certain TEAM participants could elect to participate in Track 2 beginning in PY 2 and stay in Track 2 for the remainder of the model (PYs 2 through 5). Track 2 would have two-sided financial risk in the form of reconciliation payments and repayment amounts, subject to 10% stop-gain and stop-loss limits, a CQS adjustment percentage of up to 10% for positive reconciliation amounts, and a CQS adjustment percentage of up to 15% for negative reconciliation amounts. Track 2 is only available to the following:
  • Safety net hospitals. A hospital must meet at least one of the following: 1. Exceeds the 75th percentile of the proportion of Medicare beneficiaries considered dually eligible for Medicare and Medicaid across all PPS acute care hospitals in the baseline period; 2. Exceeds the 75th percentile of the proportion of Medicare beneficiaries partially or fully eligible to receive Part D low-income subsidies across all PPS acute care hospitals in the baseline period
  • Rural hospitals. A hospital must meet one of following: 1. Located in a rural area; 2. Is Located in a rural census tract; 3. Reclassified as a rural hospital (under § 412.103); or, 4. A rural referral center
  • Medicare dependent hospital
  • Sole community hospital
  • Essential access community hospitals

• Track 3 would be available in PYs 1 through 5 for all TEAM Participants. CMS proposes that Track 3 would have two-sided financial risk in the form of reconciliation payments or repayment amounts, subject to 20% stop-gain and stop-loss limits and a CQS adjustment percentage of up to 10%.

Finally, CMS propose to allow a one-year glide path to two-sided risk for TEAM participants. TEAM participants can select between one of two tracks for the PY 1—either Track 1 or 3.

6. How would the financials of TEAM work?

As an episode-based model, TEAM participants are held accountable for the cost and quality of the episode they initiate and for downstream costs up to 30 days afterwards. Hospitals continue to bill Medicare under the traditional fee-for-service system (FFS) for services furnished to Medicare FFS beneficiaries. However, the TEAM participant is accountable at the end of the performance year through a reconciliation payment. That amount depends on the Track, the CQS and the hospital spending compared to the target price.

CMS proposes using three years of baseline data, trended forward to the performance year, to calculate benchmark prices at the level of MS-DRG/HCPCS episode type and region. Target prices for all TEAM participants will bet the regional prices. CMS proposes weighting episode spending from baseline year 1 at 17%, baseline year 2 at 33%, and baseline year 3 at 50%. This would mean the most recent episode spending patterns are weighted most strongly to the benchmark price. The benchmark price would use average standardized spending for each MS-DRG/HCPCS episode type in each region for each episode type, resulting in 216 MS-DRG/HCPCS episode type/region-level benchmark prices.

Like past models, CMS proposes applying a prospective trend factor and a discount factor of 3% to benchmark prices as well as a prospective normalization factor to calculate preliminary target prices. CMS also proposes to risk adjust episode-level target prices at reconciliation by certain beneficiary-level variables: age group, clinical complexity (i.e., Hierarchical Condition Category) and social risk.

7. What other provisions are there?

There are many other provisions in the model, including quality, health equity, and available waivers.

• For quality requirements, CMS proposes three measures:
  • For all TEAM episodes: Hybrid Hospital-Wide All-Cause Readmission Measure with Claims and Electronic Health Record Data (CMIT ID #356)
  • For all TEAM episodes: CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID #135)
  • For LEJR episodes: Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) Patient-Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID #1618)
• CMS will also require health equity plans in the first PY.
• TEAM participants may take advantage of certain waivers and beneficiary incentives due to their participation on the model, including telehealth and three-day stay waivers.
• CMS also proposes TEAM participants be required to include in hospital discharge planning a referral to a supplier of primary care services for a TEAM beneficiary, on or prior to discharge from an anchor hospitalization or anchor procedure.

Finally, CMS is offering a voluntary “decarbonization and resilience initiative” within TEAM. The voluntary initiative would offer technical assistance for all interested TEAM participants and a proposed voluntary reporting option to capture information related Scope 1 and Scope 2 emissions as defined by the Greenhouse Gas Protocol (GHGP) framework.

How we can help

The TEAM model is included in CMS’s proposed IPPS hospital rule for FY 2025. Review CLA’s summary of that rule at CLAconnect.com. To see other CMS value models, review other CLA resources below and reach out if we can help.

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