Brian Drozdowicz , 2025-04-28 13:59:00
Adoption of value-based care (VBC) programs has continued to expand. For example, the share of healthcare payments from risk-bearing VBC programs where providers could lose revenue if they did not meet quality or cost goals reached 28.5% in 2023, up from 12.5% in 2019.
Despite this steady growth, the Centers for Medicare and Medicaid Services (CMS) will implement a significant policy change in 2026. For the first time, select hospitals must participate in one of its programs.
Approximately 750 hospitals in selected core base statistical areas around the U.S. will be required to participate in CMS’s five-year Transforming Episode Accountability Model (TEAM) program. Selected hospitals will be responsible for the costs and outcomes of fee-for-service Medicare beneficiaries for 30 days after they receive one of five high-volume surgical procedures: lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedure.
These account for about 15% of hospitals’ Medicare revenue and missing the target price will impact the bottom line.
The beginning of the new normal
TEAM is designed to reduce some of the $47.6 billion CMS spends each year on readmissions within 30 days of discharge. However, from a higher level, TEAM will also help CMS advance its goal of enrolling all traditional Medicare beneficiaries in an accountable care arrangement by 2030. That means success in TEAM will likely give organizations an advantage when the next VBC mandate from CMS becomes a reality.
Importantly, if TEAM significantly improves clinical outcomes and reduces costs, hospitals and health systems can expect more expanded value-based care programs.
Preparing for this value-based care-driven environment requires a more proactive care approach than some provider organizations are accustomed to. Evolving into a more proactive organization requires not just more data, but the right insights from care settings that have previously been blind spots, such as post-acute care. This data-driven, preventive strategy has been implemented at several leading health systems using that knowledge and experience to prepare for healthcare’s New Normal.
Time for TEAM work
In the near term, TEAM participation could have a significant effect on hospitals’ financial performance for two primary reasons:
- Beginning in TEAM’s second year, hospitals could lose revenue. Similar to other bundled payment programs CMS has implemented, if patient expenditures exceed payment for the episode, the hospitals will need to cover the excess.
- Cost limits or “pricing” are based on a hospital’s geographic region, not its individual historical costs. Large hospitals in typically more expensive metropolitan areas participating in TEAM could be disadvantaged, even if they consistently deliver better outcomes.
According to one estimate, hospitals could lose as much as $1,750 per episode of care if unexpected costs occur, such as patients being readmitted within 30 days. Multiplied by thousands or tens of thousands of procedures a year, unprepared hospitals stand to lose millions of dollars annually.
Risk outside the four walls
A significant aspect in preparing for TEAM is for hospitals to review their post-acute care (PAC) facility network, where many patients will be transferred after the procedure. That is because between 21% and 53% of spending associated with the TEAM program’s designated procedures occurs after patients leave hospitals.
Not only could a large portion of spending occur outside a hospital’s walls, skilled nursing facilities (SNFs) and other PAC providers, known as collaborators under the TEAM model, also bear most of the responsibility of preventing costly hospital readmissions. It would benefit hospitals immensely if their care managers had continuous visibility into patients’ health status and trajectory during post-acute admissions.
Yet, the methods most hospitals use to monitor the health and care of their patients in PAC facilities are antiquated by today’s standards. Patients are usually transferred with a stack of paper forms and other documentation from the hospital for clinicians at the SNF to interpret and input into their electronic health record (EHR). As patients recover and rehabilitate, hospital and PAC facility clinicians still exchange most updates via fax or phone.
Inconsistent and inefficient care coordination and collaboration workflows like these inevitably raise the risk of post-operative complications or adverse events going undetected until the patient needs emergency care and rehospitalization. Both outcomes would likely drive episode costs over the TEAM pricing limits.
Shining light into the black hole
Hospital leaders and clinicians often refer to this lack of visibility into their patients’ post-acute care as “the black hole.” Given the inherent risks, many hospitals and health systems have taken necessary steps to overhaul post-acute care monitoring protocols by using real-time and easily accessible data and care collaboration tools.
These technologies offer connectivity to the PAC facilities’ EHRs, even for facilities that hospitals might consider “out-of-network.” From the hospital’s EHR, care managers can monitor each patient’s journey around-the-clock, regardless of the post-acute care facility’s staffing levels or availability.
Similarly, with the same tools, hospitals can accurately assess patients’ likelihood of hospital readmission within seven or 30 days through algorithmic risk scores based on data from medications, therapy notes, lab results, progress notes and vital signs. The score enables care managers to identify higher-risk patients and intervene before an emergency department visit or rehospitalization is required, significantly increasing an episode’s total costs.
As noted earlier, the TEAM model includes collaborators who work with hospitals to ensure smooth transitions of care and improved patient outcomes. These include not only nursing homes, but also home health agencies, inpatient rehabilitation facilities or other PAC providers. Collaborators assume financial responsibility for their portions of the bundled payment and may receive financial incentives for delivering high-quality, cost-effective care. They are assisted by collaboration agents, who manage financial distributions, including gainsharing payments (rewards for cost savings and quality improvements).
Lastly, evolving to a connected, data-driven post-acute care management strategy helps hospitals control episode costs by identifying collaborators that share their commitment to quality and efficiency, and building a network around those partners. For example, hospitals can create scorecards based on key performance metrics such as 30-day readmission rates, transfer rates, and length of stay. Hospitals can also track and compare PAC facilities in their networks, based on quality metrics from CMS, health inspection data, staffing performance, rehospitalization and ED visit rates.
Incorporating these strategies and partners helps hospitals gain better control over episode costs, improved care coordination and stronger patient outcomes. In turn, collaborators benefit by sharing in savings, securing strong referral pipelines and improving care efficiencies. Both groups align incentives to enhance care quality while keeping costs within the bundled payment framework.
Where to turn?
As hospitals consider their options for addressing the TEAM mandate, they should consider the following actions:
- Seek partners with broad collaboration networks that can offer patient visibility in PAC settings to control costs and improve outcomes.
- Consider advisors with a track record of helping hospitals reduce lost reimbursements, lower avoidable readmissions and penalties, and improve patient satisfaction.
- Explore technology that significantly reduces or eliminates manual data management activities in favor of easily interpreted, actionable guidance, such as identifying patients at highest risk for readmission and ranking PAC providers.
The value of preparation
For years, CMS has stated and developed numerous voluntary programs demonstrating its belief in VBC as the highest-quality, most cost-effective care strategy for its beneficiaries and participating providers. The TEAM program represents a significant step forward in the agency’s commitment and will likely influence private payers toward a similar path.
Provider organizations, which depend on CMS for nearly half or more of their revenue, should recognize the opportunity presented in TEAM to prepare and equip their organizations for this value-based care future. The resulting proactive care strategy and workflows will support the hospital’s long-term sustainability and likely improve patient outcomes and experiences.
Source: skynesher, Getty Images
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