Improving Episode-based Performance and Preparing for CMS TEAM

The U.S. Centers for Medicare & Medicaid Services (CMS) aims to transition the majority of Medicare beneficiaries into a value-based care payment structure by 2030. This transition will become a reality for more than 741 hospitals in January of 2026, when CMS implements the Transforming Episode Accountability Model (TEAM).

TEAM is expected to span a five-year period, ending on Dec. 31, 2030. Episodes included in the program begin with a hospital inpatient stay or hospital outpatient procedure for lower extremity joint replacement, surgical hip femur fracture treatment, spinal fusion, coronary artery bypass grafts, and major bowel procedures. Episodes end 30 days after the individual leaves the hospital.

Hospitals that have found success with early episode-based payment models can voluntarily opt into TEAM, including those currently participating in the Comprehensive Care for Joint Replacement (CJR) Model and Bundled Payments for Care Improvement (BPCI) Advanced model. The voluntary election period is January 1–31, 2025.

Healthcare organizations that assess their readiness for episode-based payment models are better positioned to avoid financial risk. For TEAM, leaders can do this by measuring their current performance and evaluating clinical capabilities across the episode types included in the model. There is still time to measure and make changes prior to the start of the program—and most organizations will enter TEAM by choosing Financial Track 1 for the first year, which carries no downside risk. 

Assessing readiness to succeed in CMS TEAM

Guidehouse analyzed the 2023 Medicare Provider Analysis and Review (MEDPAR) dataset inclusive of Medicare Fee-For-Service (FFS) claims to evaluate mandatory and voluntary participant performance across the nation. MEDPAR claims offer a directional view of performance—they’re not based on CMS-provided target prices, which are yet to be released. Using MEDPAR, we calculated benchmark performance at the 50th percentile and top quartile by region as defined by the nine U.S. Census Bureau divisions. Guidehouse uses the top quartile as a benchmark, as it aligns with the targets set by CMS for BPCI-Advanced.

Read on to learn about our findings related to the performance of more than 700 hospitals required to participate in TEAM and learn how your organization can improve its episodic performance.

Many hospitals are performing below the benchmark

Out of the 741 mandatory participants, 37 did not have claims in the 2023 MEDPAR dataset, and two hospitals were located outside of the 50 U.S. states, beyond the Census Divisions included in our study. Of the remaining 702 hospitals, 66% were underperforming when compared to top-quartile benchmarks, suggesting potential financial risk in the new model. Overall spending performance is affected by multiple factors, including readmissions, post-acute spending, and variations in care. In general, our analysis demonstrates that many of the mandatory participant organizations are performing below the 50th percentile.

Take readmissions as an example: top-quartile performance—defined as a readmission rate below the 25th percentile (lower is better)—indicates effectiveness in transitioning patients across different levels of care. Readmissions can result from issues such as delays in care, issues with medication management and adherence, lapses in care coordination, and ineffective patient education.

Figure 1 shows the percentage of participants by region with readmission rates in line with leading practice (25th percentile and below). Guidehouse’s analysis indicates that the highest percentage of participants fall above the 50th percentile for readmission rates. The West South Central and Pacific divisions have the highest percentage of participants with readmission rates at or exceeding the 50th percentile, highlighting a need to enhance readmission reduction strategies. Across all Census Divisions, the average cost per readmission is $15,100, a significant burden on the overall cost for an episode.

Figure 1

Post-acute care is another cost that can have a significant impact on episode performance, as overall spending is heavily influenced by length of stay and utilization in this care setting. As shown in Figure 2, the average utilization rate of post-acute care for the five procedural areas included in TEAM is 54.8% among the 702 hospitals included in our analysis, varying across regions from 37.3% to 80.2%. This is likely influenced by the growing popularity of Medicare Advantage plans, widespread access to post-acute services, and the demographics of the patient population.

Figure 2

A balance must be achieved in post-acute utilization to ensure that patients receive appropriate levels of care, as there is a risk of readmission among patients who may require inpatient post-acute services but do not receive them. Healthcare organizations can strike this balance by leveraging medical criteria review for each patient and enhancing services in the home. The pandemic accelerated the adoption of care-at-home models, prompting many organizations to develop telehealth options and provide in-home visits from a clinician, which can complement home health services and hospital-at-home programs.

Guidehouse’s analysis of the mandatory TEAM participants indicates significant variation in skilled nursing facility (SNF) length of stay (LOS), with a range of 21.2 to 24.9 days in the top-quartile of each division. The average SNF LOS in 2023 among the 702 hospitals analyzed was 27.4 days. Within each division, the overall average ranged from 22.1 to 30.8 days. As shown in Figure 3, the percentage of participants exceeding the 50th percentile ranged from 37.7% to 68.4%, indicating significant variation and an opportunity to better manage care across regions. 

Looking across all organizations analyzed, there is an opportunity to “win” in TEAM through thoughtful care redesign that includes implementation of improved transitions of care and better care management across the care continuum.

How hospitals can succeed under performance-based contracts 

While a variety of factors can influence episode cost of care, there are clear steps hospitals can take to enhance quality and control costs:

• Understand your quality scores: CMS TEAM will measure readmissions, patient-reported outcomes, and patient safety indicators. Make sure your team is aligned on where you stand.
• Evaluate baseline performance: It will be important for organizations to understand current state performance relative to the provided target prices, so that they can develop strategies to reduce costs where necessary.
• Focus on care transitions: Care transitions play a major role in episodic performance. Ensure your organization is providing appropriate transition care management as inpatients are discharged.
• Provide ambulatory care management for high-risk and bundle patients: Enhanced management of ambulatory care can improve coordination, enhance patient education, and increase adherence to care plans.
• Enhance patient access across ambulatory provider sites: Ensure appropriate follow-up care and triaging exists in both primary and specialty facilities to avoid readmissions when patients’ symptoms are exacerbated.
• Review your service line performance: Identify quality and operational gaps and build alignment across providers to reduce care variation.
• Develop strategies beyond acute care: Consider integrating post-acute services into your operating model to better control quality and costs, either internally or through a collaborative.