The Transforming Episode Accountability Model began January 1, 2026 and runs through 2030. It is mandatory, which is the first thing that distinguishes it from a decade of voluntary experiments: more than 700 acute care hospitals in 188 markets are required to assume financial risk for five surgical episodes, covering about 25% of Medicare beneficiaries.
The episodes are lower extremity joint replacement, coronary artery bypass graft, spinal fusion, surgical hip and femur fracture treatment, and major bowel procedures, together accounting for nearly 900,000 surgeries and roughly $18 billion in Medicare hospital payments in 2022.
The structure is straightforward. A hospital receives a target price covering the surgery and everything Medicare pays for in the 30 days after discharge, including skilled nursing stays and follow-up visits. Come in under the target and the hospital keeps the difference; go over and it repays Medicare.
The logic is sound. Medicare currently pays hospitals and post-acute providers separately, so hospitals aren't accountable for what happens after surgery, which is a genuine fragmentation problem. But the interesting question is where a 30-day accountability window actually creates pressure, and the answer is uneven in a way that matters.
The asymmetry that shapes everything
Post-acute care is not a large share of most TEAM episodes. It accounts for 14% of total episode costs for CABG, 18% for spinal fusion, 21% for major bowel procedures, and 27% for major joint replacement.
Then there is surgical hip and femur fracture treatment, where approximately 54% of costs occur in the post-acute period.
That single number changes the character of the model. For four of the five episodes, a hospital wanting to hit its target price will find most of the available savings inside its own walls: implant costs, operating room efficiency, length of stay, complication avoidance. Those are largely benign levers, and improving them is exactly what the model intends.
For hip and femur fracture, the math points somewhere else entirely. More than half the episode cost sits in skilled nursing facilities, inpatient rehabilitation, and home health after discharge. A hospital under financial pressure on SHFFT episodes cannot reach its target primarily through surgical efficiency. It has to influence post-discharge utilization.
And the SHFFT population is the most vulnerable in the model. Hip fracture patients are typically elderly, frequently frail, often admitted from assisted living or nursing facilities, and commonly have cognitive impairment or multiple comorbidities. They are precisely the patients for whom post-acute rehabilitation determines whether they walk again or return home at all.
So the episode where the financial incentive to constrain post-acute care is strongest is the episode where post-acute care matters most clinically. That is the central tension in the model, and it is not hypothetical.
The incentive Medicare is now creating for itself
Here is the uncomfortable parallel worth drawing.
The HHS Office of Inspector General has documented Medicare Advantage plans denying post-acute care at high rates, then overturning nearly all of those denials on appeal, a pattern that drew substantial criticism precisely because the financial incentive was so visible: plans paid a fixed amount per enrollee keep what they do not spend.
TEAM applies a structurally similar incentive to hospitals in traditional Medicare. Give a hospital a fixed target price covering 30 days post-discharge, and every skilled nursing day it can avoid is money it keeps. The mechanism differs, hospitals do not issue coverage denials, they influence discharge destination, length of stay recommendations, and referral patterns, but the direction of the incentive is the same.
This is not an argument that TEAM is bad policy. Fragmentation is real, unnecessary post-acute utilization exists, and the coordination TEAM encourages, better discharge planning, fewer avoidable readmissions, tighter handoffs, produces genuine benefits. The point is narrower: CMS is criticizing one program for restricting post-acute care while building a program with a comparable incentive into another, and the guardrails deserve as much attention in the second case as they got in the first.
The 30-day window is itself a meaningful guardrail. Prior CMS bundles used 90-day episodes; TEAM's 30 days reduces spending variation, and it also limits how much post-acute care falls inside the hospital's risk. A patient still needing rehabilitation on day 35 is no longer the hospital's financial problem. That caps both the savings opportunity and the potential harm.
The guardrail that was removed
One change deserves flagging. The 2026 IPPS final rule updated TEAM policies including the removal of hospital health equity plans and Health Related Social Needs screening and reporting.
Bundled payment models carry a well-documented risk: when a hospital is accountable for total episode cost, patients who are likely to cost more, those who are frail, socially isolated, housing-unstable, or without family support, become financially unattractive. Not through explicit refusal, but through the accumulated small decisions of who gets steered where.
Health equity plans and social needs screening were the monitoring mechanism for exactly that risk. Removing them does not create the incentive, which is inherent in bundling, but it removes the instrument for detecting whether the incentive is producing disparities. Under a model where more than half of one episode's cost sits in post-discharge care for a frail population, that visibility had a specific purpose.
The money is a transfer, not a bonus pool
Hospitals should understand what the financial structure actually is. Target prices are based on average risk-adjusted spending per episode in each of the nine US census divisions over a three-year baseline, adjusted for quality.
Regional averaging means roughly half of hospitals start above their target by construction. One analysis of 2023 Medicare claims found that up to two-thirds of hospitals could lose an average of $1,350 in revenue per case.
That is not a shared-savings program where efficient hospitals earn bonuses and everyone else is neutral. It is a redistribution from higher-cost to lower-cost hospitals within each region, with CMS projecting about $481 million in Medicare savings over the five performance years taken off the top.
The hospitals most likely to be above regional average are, predictably, those serving sicker and more complex populations, teaching hospitals, safety-net institutions, and facilities in areas with fewer post-acute alternatives. Risk adjustment mitigates this but has never fully solved it, because risk adjustment captures diagnoses better than it captures social complexity.
What comes next, and what to watch
TEAM is not the end state. CMS has proposed CJR-X, a nationwide bundled payment model for lower extremity joint replacement, with an earliest implementation of October 1, 2027. Mandatory episode-based payment is expanding, not being tested for possible expansion.
Three things will indicate how this actually plays out.
Watch SHFFT discharge patterns specifically. If skilled nursing utilization for hip fracture patients falls sharply at TEAM hospitals relative to non-participants, that is the model working as intended or the model doing harm, and distinguishing between them requires functional outcomes, not just cost data. Whether patients regained mobility and returned home is the question, and readmission rates alone will not answer it.
Watch whether case mix shifts. If TEAM hospitals see fewer complex hip fractures over time, that could reflect appropriate regionalization or it could reflect avoidance. Without the equity monitoring that was removed, it will be harder to tell.
And watch the second-order effect on post-acute providers. Skilled nursing facilities and inpatient rehab in TEAM markets are about to face referral pressure from 741 hospitals simultaneously, in a sector already under financial strain. A model that succeeds at reducing post-acute utilization by design will reduce post-acute revenue by consequence, and the capacity that disappears will not be there for the patients who genuinely need it.