Forecasting Financial Risk: Unpacking Which Hospitals and Health Systems May Lose (or Gain) Under TEAM

The CMS Transforming Episode Accountability Model (TEAM) introduces a new level of financial responsibility for hospitals. Unlike past bundled payment models, TEAM is a five-year, mandatory episode model starting January 1, 2026. Participation is required for hospitals located in selected Core-Based Statistical Areas, with approximately 741 hospitals across 188 regions.

As hospitals prepare for its rollout, one question is top of mind: who will come out ahead and who could lose millions?

Recent analyses from Brandeis University and the Institute for Accountable Care (IAC) suggest that financial outcomes under TEAM may vary widely. In fact, projections indicate that two-thirds of hospitals could face revenue losses in the early performance years. These findings should serve as a clear warning to hospitals to assess their risk profiles now.

In this article, we’ll break down TEAM and why financial performance matters in the program. Plus we’ll help you identify the early warning signs that your hospital may be vulnerable under this new model.

What Is CMS TEAM and Why Does It Matter Financially?

TEAM is CMS’s newest bundled payment initiative, aimed at improving care coordination and reducing costs across an episode of care. Unlike prior models like BPCI-A, TEAM focuses on five surgical episode categories, applies to hospitals nationwide, and is mandatory for a large portion of hospitals.

Key features of CMS TEAM include:

• Episode-based payments that cover all services for a patient’s care journey, from admission through post-acute recovery.

• Reconciliation payments based on performance against a target price.

• Required participation for most acute care hospitals in selected geographic areas.

• Adjustments based on quality metrics, including readmission rates and patient outcomes.

These factors create financial pressure for hospitals to manage episodes tightly. If actual costs exceed the benchmark and quality falls short, hospitals are on the hook for repayment.

Read more about Why the CMS TEAM Model Is Both a Risk and a Huge Opportunity for Hospitals

Which Hospitals May Lose Under TEAM?

Not every hospital is equally prepared for TEAM. Some have already invested in care redesign, data systems, and episode management. Others may be caught off guard.

Common Characteristics of Hospitals At-Risk Under CMS TEAM:

• High reliance on institutional post-acute care, such as SNFs or IRFs, especially when length of stay is long.

• Lack of participation in BPCI-A or CJR, meaning they may be new to bundled payment models entirely.

• Fragmented care coordination, where transitions between inpatient and outpatient care are poorly managed.

• Limited data infrastructure, making it difficult to monitor performance in real time.

• High baseline spending, especially in categories targeted by CMS for cost reduction.

If your hospital checks several of these boxes, it may be time to reassess episode management strategies.

Early Warning Signs Your Hospital May Be at Risk In the Upcoming CMS TEAM Program

The TEAM model is set to begin in 2026, but performance Year 1 runs January 1 to December 31, 2026. Episodes are attributed to PY1 when the anchor date is in 2026. CMS shared preliminary baseline data and target prices with participants in summer and fall 2025.

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Here are some early indicators that your hospital could be heading toward financial penalties:

1. Post-Acute Spending Outliers

If your average spending on SNF or IRF care is higher than the national benchmark, your hospital may fall short of CMS’s target pricing.

2. Frequent Readmissions

TEAM rewards hospitals that reduce complications and avoid preventable readmissions. If your 30-day readmission rate is above the median for target episodes, that could lead to payment reductions.

3. Gaps in Documentation

Accurate documentation drives risk adjustment. If your coding practices don’t fully capture patient severity, you may be under-credited for caring for complex patients.

4. Minimal Use of Home Health

Hospitals that have not yet embraced home health as a substitute for SNF care may struggle to align with CMS’s cost expectations.

5. Limited Experience with Bundled Payments

If your hospital hasn’t previously engaged in bundled payment programs like BPCI-A, there may be a steep learning curve in managing episodes efficiently.

Recognizing these patterns early can help guide strategic investments before financial losses mount.

Which Hospitals May Gain Under the New CMS TEAM Model?

On the flip side, some hospitals stand to benefit from TEAM. These are typically organizations that have already invested in value-based care infrastructure, population health, and episode management.

Common characteristics of likely gainers:

• Strong care coordination programs, including discharge planning and post-acute follow-up.

• Experienced participants in CJR or BPCI-A who have already seen success in similar models.

• Robust data systems that track utilization, quality metrics, and cost trends in real time.

• Partnerships with high-performing post-acute providers, including preferred SNFs and home health agencies.

• Flexible staffing models that can adjust to care redesign initiatives.

These hospitals are often already operating below CMS benchmarks and are better positioned to earn shared savings.

Risk Isn’t Just About Spending: Quality Matters Too

While much attention is focused on cost control, TEAM also ties payments to quality. Hospitals that save money but deliver subpar care may still face penalties or reduced savings.

CMS TEAM quality measures include:

• Readmission rates

• Mortality

• Complications

• Quality is assessed using hospital-wide readmissions, patient safety (e.g., complication composites such as PSI-90), and patient-reported outcomes, which together adjust reconciliation amounts.

Hospitals must balance efficiency with outcomes. Driving down costs at the expense of patient safety could backfire financially.

That’s why it's important to consider both financial and clinical metrics when forecasting your TEAM risk profile.

Regional Variation Adds Complexity for CMS TEAM

Performance under TEAM will not be uniform across the country. CMS will calculate benchmarks based on regional averages, which means your financial performance depends in part on how peers in your area perform.

For example, if your hospital is in a high-spending region but delivers care more efficiently than your neighbors, you may benefit. On the other hand, hospitals in low-spending areas will have tighter benchmarks to meet.

Regional dynamics also affect post-acute care availability. Some areas may have robust home health networks, while others rely more heavily on institutional care, limiting flexibility in care redesign.

Target prices are set from three years of baseline data at the MS-DRG or HCPCS and Census-division region level, trended forward, and discounted by 1.5 to 2.0 percent depending on the episode category.

How to Proactively Manage Your Risk Under CMS TEAM

The good news is that hospitals still have time to prepare. TEAM doesn’t go live until 2026, but performance year benchmarks will be based on care delivered as early as 2025. The more proactive your hospital is now, the better positioned you'll be to avoid losses and potentially earn shared savings.

Here are seven concrete steps to reduce financial exposure and improve your standing under TEAM:

1. Conduct a Baseline Episode Analysis

Start by reviewing historical claims and episode-level data. Identify which clinical episodes (e.g., joint replacement, heart failure) account for the highest volume, costs, and variation in outcomes. Pay particular attention to:

• **Post-acute care spending patterns
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• **Readmission rates
  **
• **Length of stay
  **
• **High-cost outliers
  **

This analysis will help you spot which episodes are financially risky under TEAM’s bundled payment structure. From there, you can prioritize where to focus redesign efforts.

2. Build or Strengthen Your Episode Management Team

Successful TEAM participation requires more than just executive support. It depends on cross-functional coordination that includes:

• Physicians and surgeons

• Case managers and discharge planners

• Nurses and therapists

• Revenue cycle and coding specialists

• IT and data analysts

Ensure this team meets regularly, understands how bundled payments work, and is aligned around improving cost efficiency and outcomes across the full care episode.

3. Create Preferred Post-Acute Networks

Institutional post-acute care is one of the biggest drivers of episode cost. To manage this, hospitals should:

• Identify high-performing SNFs and home health agencies using CMS star ratings, readmission data, and internal outcomes.

• Develop preferred provider partnerships based on quality and cost alignment.

• Educate discharge planners to guide patients toward the most effective, value-based options.

Even informal networks can lead to more predictable performance and better patient outcomes.

4. Optimize Coding and Documentation

Accurate documentation supports appropriate risk adjustment, which directly affects your hospital’s benchmark pricing under TEAM. If your coding doesn’t reflect the full complexity of your patient population, you may be penalized unfairly.

• Conduct regular chart audits to identify missed codes.

• Train clinicians to document all relevant comorbidities.

• Align coding teams with clinical staff so both groups understand how documentation influences financial outcomes.

This is a low-cost, high-impact way to improve your hospital’s financial position.

5. Monitor Quality Metrics Now

Quality performance is built into TEAM’s payment calculations. Waiting until the model is live to begin tracking metrics is too late.

Start monitoring your performance in areas like:

• 30-day readmission rates

• Mortality and complication rates

• Patient satisfaction (e.g., HCAHPS scores)

• Timeliness of follow-up care

Establishing a baseline now will give your hospital time to implement interventions before those numbers impact payment.

6. Simulate TEAM Performance

One of the most effective ways to prepare is to model what TEAM performance would look like using your hospital’s own historical data. Create mock reconciliation reports using TEAM’s episode definitions, benchmark pricing rules, and quality adjustments to forecast results before the program goes live.

Avant-garde Health can perform this simulation for you. By combining publicly available CMS data with your EHR data, we can run predictive analytics that estimate your performance under TEAM, identify high-risk service lines, and model “what-if” scenarios. This approach gives you an early view of where you stand financially and clinically, so you can prioritize interventions before performance years begin.

Simulation lets you:

• Forecast financial exposure

• Identify high-risk service lines

• Test what-if scenarios

• Build executive buy-in for investments

Even if estimates are not perfect, they provide directional insights that help guide strategic decisions and reduce the risk of costly surprises.

7. Join a Learning Collaborative

Hospitals do not need to go it alone. Participating in a TEAM-focused learning collaborative gives your organization access to:

• Peer benchmarking data

• Best practices in care redesign and episode management

• CMS policy updates and insights

• Shared tools and dashboards

• A network of hospitals facing similar challenges

Whether hosted by a state association, health system, or national convener, collaboratives create structure and accountability as you ramp up for TEAM. They can also help your hospital avoid common pitfalls and fast-track improvements based on real-world evidence.

Request to join the AGH TEAM Interactive Collaborative with 160+ individuals and more than 40 of the top hospitals and health systems.

Which Hospitals Will Lose or Gain Under CMS TEAM?

TEAM success will not come from last-minute fixes. Hospitals that take a structured, data-driven approach now are far more likely to gain ground in the first performance years. By analyzing your current performance, investing in care coordination, and engaging with peers through a learning collaborative, your hospital can move from financial risk to opportunity under TEAM.

To learn more strategies for success in TEAM, join 160+ individuals and more than 40 of the top hospitals and health systems in the interactive CMS TEAM Collaborative.

Apply to join for FREE today!