TEAM FY2026 Final Rule: Key Regulatory Updates & What Providers Need to Know
- APMConnect
- Jul 31
- 3 min read
Updated: Aug 1
Key Message: Most regulations finalized without modification from proposal
The Centers for Medicare & Medicaid Services (CMS) has finalized key updates to the Transforming Episode Accountability Model - TEAM FY2026.
TEAM is a mandatory five-year payment model running January 1, 2026, through December 31, 2030, designed to improve care coordination and cost efficiency for surgical and procedural episodes.
For hospitals, health systems, and post-acute providers, this rule signals clarity on the regulatory framework for the first performance year—and confirms that most of the proposed policies are moving forward unchanged.
Financial Outlook
CMS projects no significant changes to TEAM’s estimated savings, with the model still expected to generate $368 million in Medicare savings over its five-year duration.
Early modeling underscores the importance of proactive preparation for hospitals to avoid downside risk and capture any potential shared savings under TEAM.
TEAM FY2026 Finalized Changes Summary
For a more detailed view with excerpts from the final rule, download the FY26 TEAM Regulations Summarized (PDF) provided below.
1. Mandatory Participation & Deferment (finalized without modification from proposal)
A limited deferment period for hospitals that newly qualify for TEAM after 2024.
Monitoring for patient shifting from TEAM participants to non-participants.
A policy to remove hospitals from TEAM if they no longer meet eligibility.
2. Medicare Dependent Hospitals (MDH) (finalized without modification from proposal)
TEAM participation eligibility for Track 2 will be based on MDH status at the time of track selection for the performance year.
3. Indian Health Service (IHS) & Tribal Hospitals
Finalized exclusion of IHS and Tribal hospitals from TEAM, regardless of episode volume, as they are not paid under IPPS or OPPS.
4. Quality Measures
No change to the Hybrid Hospital-Wide Readmission (HWR) measure for now; claims-only data will be used for PY1.
Finalized without modification from proposal:
Inclusion of the Information Transfer PRO-PM starting in PY3.
A neutral quality score (scaled to 50) will be applied if no quality data is available for a participant.
5. Pricing Methodology Overhaul (finalized without modification from proposal)
Adjustments to account for MS-DRG and HCPCS coding changes.
Use of benchmark prices for normalization factors.
Calculations done at the regional and episode-type level, not national.
Share preliminary target prices specifically for the region and for the TEAM participant.
A log-linear model will determine regional trend factors for pricing.
Calculation of the prospective trend factor as the average of the regional trend factor and a national trend factor.
Apply the high-cost outlier cap to episodes in the trend years in addition to each baseline year in the baseline period
Replacement of the Area Deprivation Index (ADI) with the Community Deprivation Index (CDI) for social risk adjustment.
6. Risk Adjustment (finalized without modification from proposal)
A 180-day lookback period for assigning HCC risk flags was finalized.
Adoption of HCC Version 28, aligning with broader CMS programs.
7. Low Volume Hospitals
Hospitals with fewer than 31 episodes per category in a baseline period will not bear downside risk, though CMS will still reconcile their performance.
8. Technical & Operational Changes (finalized without modification from proposal)
Episode attribution and reconciliation will align to the anchor discharge date.
No changes to dollar calculations (target prices, post-episode spending) will remaining in standardized dollars, not real dollars.
9. Health Data Reporting Requirements Rolled Back
Health Equity Plans and social drivers of health data reporting are removed from TEAM.
The “gender” variable has been renamed to “sex” for clarity.
10. Strengthening Continuity with Primary Care (finalized WITH modification from proposal)
TEAM participants must refer patients back to their existing primary care providers as recorded on admission or, if none are recorded at admission, make a new referral prior to discharge.
CMS emphasizes preserving beneficiary choice in provider selection.
11. Waivers: Expanded 3-Day SNF Rule (finalized without modification from proposal)
TEAM participants may now use the 3-day SNF waiver for beneficiaries discharged to swing bed units in hospitals and CAHs.
12. Decarbonization and Resilience Initiative Removed
CMS has removed the Decarbonization and Resilience Initiative (DRI) from TEAM requirements, reducing the administrative burden on hospitals.
Final Thoughts
TEAM continues to evolve. These finalized updates reflect CMS's focus on administrative simplicity, regional tailoring, and collaborative care across episode-based payments.
Providers should begin preparing now to operationalize care delivery models for success in TEAM before mandatory implementation in 2026.
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