Transforming Episode Accountability Model: A New Era in Healthcare Financial Management

Written by Cathryn Johnson | May 27, 2025 12:00:00 PM

The Centers for Medicare and Medicaid Services (CMS) finalized a 5-year mandatory bundle payment model called Transforming Episode Accountability Model (TEAM), aimed to address fragmented care experienced by Medicare beneficiaries pre/post-surgery, enhance care coordination, patient transitions, and reduce avoidable readmissions with potential to save $705 million over five years.

Timeline and Scope

Duration: January 2026 - December 2030
Coverage: Hospitals selected to participate are mandated to join

Bundles and Costs

Participating hospitals receive regional target prices in late 2025 to cover all costs for a 30-day episode of care for the following bundles:

Bundle Name	Average National Cost	Number of National Episodes	MS-DRGs and/or HCPCS codes*
Coronary Artery Bypass Graft Surgery (CABG)	$48,905	28,088	MS-DRG 231, 232, 233, 234, 235, 236
Lower Extremity Joint Replacement (LEJR)	$21,063	215,957	MS-DRG 469, 470, 521, 522 HCPCS 27447, 27130, 27702
Surgical Hip and Femur Fracture Treatment (SHFFT)	$35,501	75,254	MS-DRG 480, 481, 482
Spinal Fusion (non-Cervical)	$46,326	65,968	MS-DRG 402, 426-430, 447, 448, 450, 451, 471-473 HCPCS 22551, 22554, 22612, 22630, 22633
Major Bowel Procedure	$29,184	59,983	MS-DRG 329, 330, 331

* Note: Ambulatory Surgery Centers (ASCs) will not initiate an episode.

Accountability and Performance

Hospitals must ensure coordinated, high-quality care during the procedure and 30-days post-discharge. Providers will bill Medicare as usual, with annual reconciliation of actual costs against the target price. Bonuses or penalties will be applied based on performance.

Additional Program Elements

Participation Tracks: The program offers graduated risk through different participation tracks to accommodate varying levels of risk and reward.
Incentive Sharing: Participants can share incentives with physicians and providers.
Quarterly Deliverables: Hospitals must provide updates to Medicare.
Primary Care Referrals: Required to support long-term health outcomes.
Health Equity Plans (HEP) and Environmental Reporting: Voluntary submission of HEP and greenhouse gas metrics.

Case Study and Preparation

Hospitals will receive historical spend information and target prices in late 2025. For example, a hospital's Lower Extremity Joint Replacement 30-day bundle may reveal significant cost insights:

Facility Type	Cost/Episode Hospital	Cost/Episode Regional
All	$23,409	$17,504
Anchor Inpatient	$13,641	$13,643
Non-Anchor Inpatient	$1,099	$1,084
Skilled Nursing Facility	$8,206	$1,896
Home Health Agency	$382	$674
Outpatient	$81	$207

Future Implications

Successful bundles will position hospitals for future success if CMS mandates this program for all hospitals, adds more bundles, or if hospitals pursue commercial and/or Medicaid bundle programs with a goal to manage the total cost of care while maintaining optimal quality and outcomes.

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