Bundled Payments: What's Changing for 2026 Billing? Your Complete TEAM Model Guide

The healthcare billing landscape is experiencing its most significant transformation in decades. With the Centers for Medicare & Medicaid Services (CMS) launching the mandatory Transforming Episode Accountability Model (TEAM) on January 1, 2026, healthcare professionals across the United States must prepare for fundamental changes in how bundled payments operate.

This comprehensive guide addresses the critical questions every healthcare professional is asking about the CMS bundled payments 2026 implementation, providing evidence-based answers to help you navigate this transition successfully.

1. How Does the TEAM Model Differ from Previous Bundled Payment Programs?

The TEAM model CMS represents a paradigm shift from voluntary to mandatory participation in episode-based payment systems. According to the CMS Innovation Center, TEAM differs significantly from predecessors like the Bundled Payments for Care Improvement (BPCI) and Comprehensive Care for Joint Replacement (CJR) models.

Key Differences:

• Mandatory vs. Voluntary: Unlike previous voluntary programs, TEAM requires participation from all acute care hospitals in 188 selected Core-Based Statistical Areas
• Episode Duration: TEAM uses 30-day episodes compared to the traditional 90-day periods in most bundled payment models
• Scope: Covers five specific surgical procedures: lower extremity joint replacement, surgical hip/femur fracture treatment, spinal fusion, coronary artery bypass graft, and major bowel procedures
• Risk Structure: Offers three distinct tracks with varying financial risk levels

The American Hospital Association notes that this transforming episode accountability approach represents CMS's most ambitious mandatory alternative payment model to date.

2. What Are the Quality Measures Required for TEAM Bundled Payments?

Quality measurement under TEAM bundled payment model follows a Composite Quality Score (CQS) methodology that directly impacts financial reconciliation. The CMS TEAM Model FAQ outlines specific metrics:

Performance Year 1 Quality Measures:

• Hospital Harm-Falls with Injury (CY 2026 baseline)
• Hospital Harm-Postoperative Respiratory Failure (CY 2026 baseline)
• Thirty-Day Risk-Standardized Death Rate among Surgical Inpatients with Complications (CY 2026 baseline)
• Hospital-Level Total Hip/Knee Arthroplasty Patient-Reported Outcome Measure (CY 2025 baseline)

CQS Impact on Payments:

• Quality performance can adjust reconciliation payments up to 10%
• Poor quality performance can increase repayment amounts up to 15%
• Volume weighting ensures larger hospitals don't disproportionately influence scores

Healthcare organizations must invest in bundled payment compliance 2026 infrastructure to track these metrics effectively, as quality performance directly correlates with financial outcomes under the Medicare bundled payments structure.

3. How Do I Know if My Hospital Is Required to Participate in TEAM?

Mandatory bundled payments 2026 participation affects hospitals based on geographic location rather than organizational characteristics. CMS uses a stratified random sampling approach targeting 25% of all Core-Based Statistical Areas (CBSAs).

Participation Criteria:

• Acute care hospitals paid under Medicare's Inpatient Prospective Payment System (IPPS)
• Located in one of 188 selected CBSAs
• Performs any of the five covered surgical procedures

CBSA Selection Methodology: According to Milliman's analysis, CMS stratified CBSAs based on:

• Average number of hospitals per area
• Concentration of safety net hospitals
• Historical spending patterns
• Previous episode-based payment experience

Hospitals can verify their participation status through the CMS TEAM Model website, which provides detailed CBSA listings and eligibility information.

4. What's the Difference Between Track 1, Track 2, and Track 3 in TEAM?

The TEAM model tracks offer varying risk-reward structures designed to accommodate different hospital capabilities and risk tolerance levels. CMS designed this tiered approach to provide an on-ramp to value-based care.

Track 1: Upside-Only Risk

• Financial gains from cost savings with quality achievement
• No downside financial risk for cost overruns
• Available to all participants in Performance Year 1
• Automatic assignment for hospitals failing to select tracks

Track 2: Two-Sided Risk

• Potential for both gains and losses based on performance
• Standard risk arrangement for most participants
• Available starting Performance Year 2
• Requires annual track selection notification

Track 3: Advanced Risk

• Higher potential gains with increased downside risk
• Available to experienced participants
• Enhanced shared savings opportunities
• Requires demonstrated capability in value-based care

Safety Net Hospital Provisions: The FY 2026 IPPS rule allows safety net hospitals to remain in Track 1 for Performance Years 1-3, providing additional time to develop necessary infrastructure for bundled payment risk tracks.

5. How Are Bundled Payment Reconciliations Calculated Under TEAM?

CMS episode-based payment reconciliation follows a sophisticated methodology comparing actual Medicare spending against risk-adjusted target prices. The reconciliation process occurs annually, six months after each performance year ends.

Reconciliation Steps:

1. Performance Year Spending Calculation: CMS aggregates all Medicare Parts A & B claims for completed episodes
2. Target Price Adjustment: Preliminary targets adjust for final risk factors and outlier policies
3. Quality Score Application: CQS modifies financial outcomes up to ±10-15%
4. Final Settlement: Hospitals receive payments or owe repayments based on performance

Risk Adjustment Factors:

• Beneficiary-level: Age, severity, social risk indicators
• Hospital-level: Safety net status, case mix complexity
• Geographic: Regional cost variations, market characteristics

The Healthcare Financial Management Association emphasizes that successful reconciliation requires robust data analytics capabilities and proactive cost management strategies.

6. What Services Are Included vs. Excluded in TEAM Bundled Payments?

Understanding 30-day episode accountability scope is crucial for accurate billing and cost management under transforming episode accountability model. CMS defines episode boundaries specifically to avoid overlap with other payment models.

Included Services:

• Anchor hospitalization or outpatient procedure
• All Medicare Parts A & B services during 30-day post-discharge period
• Skilled nursing facility stays
• Home health services
• Outpatient rehabilitation therapy
• Related readmissions and complications
• Physician services related to the episode

Excluded Services:

• Unrelated medical conditions requiring separate treatment
• Services provided by non-participating providers outside episode scope
• Emergency department visits for unrelated conditions
• Preventive care services
• Chronic disease management unrelated to surgical episode

Global Period Considerations: Traditional global periods billing concepts still apply within TEAM episodes. Medicare's global surgical package typically includes 0, 10, or 90-day periods for routine post-operative care, which now falls within TEAM's 30-day accountability window for covered procedures.

7. How Do Global Periods Relate to Bundled Payments in 2026?

The relationship between global period bundled payment concepts requires careful consideration under the new bundled payment model. Traditional global periods bundle pre-operative, intraoperative, and post-operative services into a single surgical payment.

Key Distinctions:

• Global Periods: Focus on routine surgical care with defined timeframes (0, 10, or 90 days)
• TEAM Bundled Payments: Encompass broader episode accountability including complications and readmissions over 30 days

Billing Implications: Under TEAM, traditional global period rules continue governing routine post-operative care, while the bundled payment adds accountability for episode-related costs beyond routine surgical care. This creates a "bundle within a bundle" structure requiring sophisticated billing coordination.

Modifier Usage: Healthcare providers must understand when to apply modifiers like:

• Modifier 24: Unrelated E&M services during global periods
• Modifier 79: Unrelated procedures during post-operative periods
• Modifier 78: Return to OR for complications

8. What Are the Compliance Requirements for TEAM Participants?

Bundled payment compliance 2026 encompasses both operational and regulatory requirements. CMS mandates specific participant obligations to ensure program integrity and beneficiary protection.

Mandatory Requirements:

• Beneficiary Notification: Inform patients of TEAM participation during anchor procedures
• Primary Care Referral: Provide primary care referral information upon discharge
• Track Selection: Annual notification of risk track preference
• Quality Reporting: Timely submission of required quality measures
• Data Sharing: Cooperation with CMS evaluation and monitoring efforts

Documentation Standards: Participants must maintain comprehensive records demonstrating:

• Episode attribution accuracy
• Quality measure data integrity
• Care coordination activities
• Beneficiary communication compliance

Penalties for Non-Compliance: The Innovation Center reserves authority to impose sanctions including program termination for persistent non-compliance with Medicare bundled payments requirements.

9. How Should Hospitals Prepare for TEAM Implementation by January 2026?

TEAM model preparation requires comprehensive organizational transformation across clinical, operational, and financial domains. Industry experts recommend a systematic approach addressing key implementation areas.

Essential Preparation Steps:

1. Data Analytics Infrastructure

• Implement episode-based reporting capabilities
• Develop real-time cost tracking systems
• Establish quality measure monitoring tools

2. Care Coordination Systems

• Create multidisciplinary care teams
• Implement care navigator programs
• Establish post-acute care partnerships

3. Financial Management

• Develop risk assessment methodologies
• Implement budget monitoring systems
• Create reconciliation tracking capabilities

4. Staff Training and Education

• Educate clinical teams on episode accountability
• Train billing staff on new requirements
• Develop compliance monitoring protocols

Modern Healthcare reports that successful preparation typically requires 12-18 months of dedicated planning and implementation efforts.

10. What Are the Potential Financial Impacts of TEAM Bundled Payments?

Understanding bundled payment financial impact requires comprehensive analysis of historical costs, quality performance, and operational efficiency opportunities. CMS estimates TEAM will generate $705 million in Medicare savings over five years.

Revenue Opportunities:

• Shared savings from efficient care delivery
• Quality bonus payments for superior performance
• Reduced bad debt through improved care coordination

Financial Risks:

• Repayment obligations for cost overruns
• Quality penalties for poor performance
• Investment costs for infrastructure development

Success Factors: Research from The Commonwealth Fund indicates successful bundled payment programs typically achieve:

• 2-5% reduction in episode costs
• Improved quality scores
• Enhanced care coordination
• Reduced readmission rates

Healthcare organizations must conduct thorough financial modeling considering their specific case mix, quality performance, and operational capabilities to accurately assess TEAM bundled payment model impact.

Conclusion: Preparing for the Future of Healthcare Payment

The CMS bundled payments 2026 transformation through TEAM represents healthcare's evolution toward value-based care. Success requires proactive preparation, comprehensive understanding of regulatory requirements, and strategic investment in care coordination capabilities.

Healthcare professionals must recognize that episode-based payment models like TEAM will likely expand beyond the initial five surgical procedures. Organizations that excel in TEAM implementation position themselves advantageously for future bundled payment models and value-based care initiatives.

Key Takeaways:

• TEAM launches January 1, 2026, with mandatory participation for affected hospitals
• Success requires integration of clinical, operational, and financial strategies
• Quality performance directly impacts financial outcomes
• Preparation should begin immediately for affected organizations

For healthcare organizations navigating this transition, partnering with experienced bundled payment consulting firms and investing in robust data analytics infrastructure will prove essential for transforming episode accountability success.

About the Author: [Your credentials and expertise in healthcare billing and bundled payments]

Sources:

1. Centers for Medicare & Medicaid Services - TEAM Model Overview
2. Milliman - Next Generation Medicare Bundled Payments
3. American Hospital Association - Bundled Payment Resources
4. Modern Healthcare - TEAM Model Analysis
5. Commonwealth Fund - Global Bundled Payment Research
6. Healthcare Financial Management Association - Payment Model Impact Studies

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