The healthcare payment models are changing. Hospitals face growing pressure to reduce costs while improving outcomes, but at the same time, enhance patient outcomes. The CMS TEAM Model promotes a new model of accountability when hospitals are in control of whole episodes of care and not only inpatient stays.
This model is related to payment to hospitals based on the total episode costs, which covers post-acute care. Hospitals also save money when they can spend below the target prices and still achieve the quality standards. New knowledge of how episodes operate, the computation of target prices, and the importance of measures of quality can assist hospitals in preparing to make this transition.
A Look Into The CMS TEAM Model Framework
The CMS TEAM Model is a Medicare payment program where hospitals take financial responsibility for entire care episodes. One episode begins with the admission of a patient to certain MS-DRG procedures and continues 90 days after discharge. Hospitals receive reconciliation payments in case the costs of the episode are lower than the target prices and satisfy the quality requirements.
Key episode components:
- Inpatient hospitalization costs
- Post-acute care services (SNF, home health, IRF)
- Related readmissions within 90 days
- Professional services tied to the episode
- Part A and Part B Medicare spending
The model transfers the risk to the hospitals. Hospitals that manage the use of PAC, avoid readmissions, and manage transitions generate profit.
What MS-DRG Codes Qualify for Episodes?
Not all admissions trigger episodes. The Medicare TEAM Model includes specific MS-DRG categories based on volume, cost variation, and PAC utilization patterns.
Common TEAM episode categories:
- Lower extremity joint replacements (hip, knee)
- Cardiac valve procedures and coronary bypass
- Major bowel and spinal surgeries
- Acute myocardial infarction admissions
- Sepsis and respiratory infections requiring ICU care
Each MS-DRG has a unique target price reflecting historical spending patterns and risk adjustments.
Target Price Calculation and Risk Adjustment
Target prices set the financial benchmark for each episode. CMS calculates targets using three years of historical Medicare claims data. The calculation adjusts for geographic wage differences, case complexity, and patient risk scores.
Target price factors:
- Historical episode spending (hospital-specific and regional)
- Risk adjustment for patient health status
- Geographic wage index adjustments
- Quality performance discounts (up to 10% reduction)
- Peer group benchmarking comparisons
Risk adjustment accounts for patient complexity differences. Hierarchy Condition Category (HCC) scores are used by CMS in modifying episode payments. Target prices are increased for patients who have more than one chronic condition with frailty scores or the patient has severe complications. This does not allow the hospitals to evade complicated cases and make fair comparisons among various populations of patients.
Quality Metrics That Drive TEAM Success
Quality performance determines whether hospitals can share in savings. The TEAM Model CMS uses six outcome measures covering readmissions, mortality, and patient experience. Hospitals must meet minimum thresholds on each metric to qualify for reconciliation payments.
TEAM quality measures:
- Hospital-wide all-cause unplanned readmission rates
- 30-day mortality for acute myocardial infarction
- 30-day mortality for heart failure admissions
- 30-day mortality for pneumonia cases
- Hospital Consumer Assessment of Healthcare Providers (HCAHPS) scores
- Screening for social determinants of health
How Do Readmissions Impact Financial Performance?
Readmissions directly impact both costs and quality scores. Every unplanned readmission within 90 days adds to episode spending. A single readmission can eliminate episode savings.
Readmission prevention strategies:
- Comprehensive discharge planning before the patient leaves the hospital
- Medication reconciliation and patient education
- 48-72 hour post-discharge phone calls
- Home health referrals for high-risk patients
- Primary care follow-up appointments within 7-14 days
Managing Post-Acute Care Spending
Post-acute care drives most episode cost variation. PAC services account for 30-40% of episode spending in TEAM. The cost of patients released to the skilled nursing facilities is 3-4 times higher than the cost when released to home health. Patients have to be matched with hospitals to the relevant PAC settings according to the clinical requirements, rather than default referral patterns.
PAC optimization approaches:
- Use predictive models to identify optimal discharge settings
- Track PAC provider performance and outcomes
- Reduce SNF length of stay through therapy intensity
- Expand home health utilization for appropriate patients
- Monitor PAC leakage to out-of-network providers
A digital health platform with discharge disposition models helps clinical TEAMs make data-driven PAC decisions at the point of care. Persivia CareSpace® uses machine learning to recommend optimal PAC settings, helping Prime Healthcare achieve a 7% reduction in SNF length of stay across ~200 episodes.
Understanding PAC Leakage
PAC leakage occurs when patients receive care from providers outside the hospital’s preferred network. Leakage increases costs because out-of-network PAC providers may charge higher rates or provide unnecessary services. Hospitals lack visibility into care coordination when patients go elsewhere.
Care Coordination Workflows for Episode Management
Episode management requires coordination across multiple care settings. During the 90-day timeframe, hospitals will need to liaise with PAC providers, primary care USPs, and experts. Two-way communication of information makes sure that everyone is aware of the care plan, drug change, and follow-up requirements.
Essential coordination elements:
- Standardized discharge summaries are sent within 24 hours
- Real-time notifications when patients arrive at PAC facilities
- Shared care plans are accessible to all providers
- Medication reconciliation across transitions
- Scheduled follow-up appointments before discharge
The case managers can track the patients, communicate with the TEAMs, and intervene in case of problems, all within the current workflows of EHR using integrated platforms with embedded care coordination tools.
How Do Health Risk Assessments Support Equity?
The social determinants of health (SDOH) captured during admission can be used to recognize individuals who require extra assistance. Housing, food insecurity, and transport disadvantaged patients are at increased risk of readmission. Recording these factors enhances risk adjustment and makes it possible to institute specific interventions.
SDOH screening areas:
- Housing stability and homelessness risk
- Food security and nutritional access
- Transportation to medical appointments
- Social isolation and caregiver support
- Health literacy and language barriers
Analytics Requirements for TEAM Performance
Operational decisions are made by having real-time visibility of the performances of the episodes. The hospitals need to monitor the episode expenses, quality indicators, and financial predictions. Dashboards with PAC spend, readmission rates, gain/loss per episode, etc, assist the TEAMs in adapting their strategies during the performance year.
Critical analytics capabilities:
- Episode cost tracking by MS-DRG category
- PAC utilization patterns and provider performance
- Readmission risk scores and intervention triggers
- Quality measure performance and trends
- Net payment reconciliation amount (NPRA) forecasts
Custom reports showing expenditure by service category, provider, and time period reveal cost drivers. Hospitals identifying high-cost outliers can investigate causes and implement targeted improvements before reconciliation.
What is NPRA and How to Track It?
Net Payment Reconciliation Amount (NPRA) represents the final financial outcome. NPRA equals the difference between actual episode costs and target prices, adjusted for quality performance. Positive NPRA means the hospital receives a reconciliation payment. Negative NPRA requires repayment to Medicare.
NPRA calculation process:
- Calculate actual episode spending from claims
- Compared to the risk-adjusted target price
- Apply a quality performance discount or penalty
- Multiply the difference by the reconciliation percentage
- Cap gains and losses at defined thresholds
Final Thoughts
The CMS TEAM Model fundamentally changes how hospitals approach episode care. To succeed, there is a need to manage the total costs of 90-day windows and quality benchmarks. Hospitals have to maximize the use of PAC, eliminate readmissions, collaborate on care transitions, and monitor performance in real-time. Those investing in analytics and care coordination workflows position themselves for financial gains.
Persivia offers an AI-driven integrated platform that delivered $17 million in savings for Prime Healthcare across ~200 episodes. Persivia CareSpace® combines real-time analytics, predictive discharge models, and embedded care coordination tools that work within your existing EHR workflows. Track PAC spend, monitor NPRA projections, manage readmission risk, and access actionable insights at the point of care, all through a single platform backed by deep episodic care expertise.
FAQs
Does the CMS TEAM Model apply to all Medicare patients?
No, only patients admitted for specific MS-DRG procedures trigger episodes. The model covers major joint replacements, cardiac surgeries, spinal procedures, and select medical conditions.
Can hospitals lose money under TEAM if costs exceed targets?
Yes, hospitals owe repayments to Medicare when episode costs exceed target prices, even with high quality scores. Losses are capped at defined percentages.
How long does a TEAM episode last after discharge?
Episodes extend 90 days after the discharge date. All related Medicare spending counts toward episode costs, including PAC services and readmissions.
