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

The Centers for Medicare & Medicaid Services (CMS) is preparing to launch the mandatory Total Episode Alignment Model (TEAM)—a two-sided risk program designed to accelerate hospitals’ shift toward value-based care. With major financial stakes at play, TEAM presents both serious risks and remarkable opportunities for hospitals that are ready to adapt.

Here’s why hospital executives need to prepare thoughtfully—and strategically—for TEAM’s arrival.

Understanding the Financial Risks of TEAM

Mandatory programs that involve financial risk naturally raise concerns for hospital leaders—and TEAM is no exception. Here’s a closer look at the key risks the new CMS TEAM model brings.

High Stakes Financial Exposure

At the heart of TEAM’s risk is its financial impact. Hospitals could earn bonuses or face penalties of up to 20% of episode spending based on their ability to meet quality and cost targets.

To put this in perspective: if your hospital performs about 300 joint replacements a year, at an average cost of $25,000 per episode, that’s roughly $7.5 million in spending annually. Under TEAM, up to $1.5 million of that could be on the line.

And when you consider that TEAM covers five-episode categories—not just joint replacements—the financial exposure can quickly balloon, creating multi-million-dollar swings for mid-sized hospitals.

No Opt-Out Option

Unlike previous voluntary bundled payment programs—such as the Comprehensive Care for Joint Replacement (CJR)—where hospitals could exit if financial outcomes weren't favorable, TEAM participation is mandatory in selected regions. Many hospitals previously managed financial risk by opting out of bundles after initial results.

However, TEAM’s mandatory nature removes that flexibility, compelling hospitals to remain enrolled regardless of initial performance. That can present a big risk for hospitals that might have believed they were well equipped entering the program only to find out after they were grossly underprepared. This forces hospitals to be proactive, making readiness a non-negotiable priority.

Aggressive Target Pricing

TEAM also introduces target pricing with an embedded discount factor, meaning CMS will deliberately set spending targets below historical averages. In short, hospitals must immediately reduce costs just to break even.

As a result, the Research by the Institute for Accountable Care and Brandeis University predicts roughly two-thirds of participating hospitals could initially experience financial losses. If your hospital currently falls on the higher end of cost variability, significant and rapid improvements in cost efficiency are essential to avoid hefty penalties.

Burdensome Quality Reporting

Another major hurdle: TEAM requires extensive quality reporting, particularly around Patient-Reported Outcome Measures (PROMs). Consistently capturing this patient data can pose significant challenges for hospitals that lack robust data-collection systems.

As a result, these hospitals that lack robust systems to collect and report PROMs risk losing out on incentives—even if they succeed in lowering costs. To prepare for this, hospitals must invest in effective patient engagement and data collection strategies to mitigate this risk.

Why TEAM Represents a Huge Opportunity

Despite the risks, TEAM offers one of the clearest opportunities in recent years for hospitals to directly improve both financial and clinical outcomes. Hospitals that prepare well and manage their participation actively stand to benefit enormously.

Here’s why.

Potential for Substantial Financial Rewards

Hospitals that excel under TEAM can earn substantial bonuses—up to 20% of their episode spending. Returning to our earlier example, earning back 20% of $7.5 million translates to a significant bonus of $1.5 million.

These rewards can enhance your hospital’s bottom line directly or can be shared strategically with physicians to incentivize ongoing performance improvements.

Operational and Cost Efficiencies

Success in the CMS TEAM model forces hospitals to refine operations and eliminate inefficiencies—not just for the sake of compliance, but to achieve lasting improvements.

By focusing on care coordination, resource utilization, and process optimization, hospitals can boost patient throughput, reduce unnecessary costs, and enhance overall effectiveness. These efficiencies will continue to deliver savings long after the CMS program period ends.

Leadership in Value-Based Care

Hospitals that are successful with TEAM’s cost management, care coordination, and outcomes tracking will establish themselves as leaders in value-based care. Developing expertise under TEAM positions your hospital advantageously in negotiations with commercial payers and Medicare Advantage plans, which increasingly emphasize bundled payments and performance-based contracts.

Early adopters will be ready for future expansions of TEAM or similar CMS programs, maintaining a competitive advantage in an evolving reimbursement landscape.

Clinical Alignment and Physician Engagement

TEAM uniquely aligns incentives between hospitals and physicians, fostering collaboration around cost savings and improved patient outcomes. Traditionally, hospitals and clinicians have struggled to align incentives, hindering efforts to address known inefficiencies.

TEAM facilitates gainsharing arrangements, allowing both hospitals and clinicians to benefit financially from improved care coordination and cost management. This alignment helps hospitals achieve significant clinical improvements, directly benefiting patient care quality and satisfaction.

Turning Risk into Opportunity: The Proactive Approach

Ultimately, hospitals that approach TEAM passively—as just another compliance requirement—are setting themselves up for disappointment.

The organizations that will thrive under TEAM are those that view it as a catalyst for strategic transformation. It is an opportunity to invest heavily in best in class healthcare analytics, strengthen care coordination, improve patient engagement, and most importantly continue to innovate operationally.

Rather than fearing the risks, forward-thinking hospitals should look at TEAM as a unique opportunity to lead the next era of value-based healthcare—and to build a sustainable competitive advantage in an evolving reimbursement environment.

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