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CMS Issues Proposed Mandatory Rule: Transforming Episode Accountability Model (TEAM)

Part One: Background, Highlights, Resources

Author

Dana Prommel Strauss
April 16, 2024

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Onto the next big CMS Alternative Payment Model announcement of 2023/2024. To refresh, here are the models announced in the last 9 months:

Just for fun:

Next up: a refined, 30-day acute episodes of care model that will begin the day after the Bundled Payment for Care Improvement-Advanced Model ends.

The fun acronym for this model? :

Transforming Episode Accountability Model (TEAM):

The next step in CMS’ Specialty and Episodes of Care Strategy

Model innovations typically come directly from the CMS Innovation Center.

But this week, CMS released the TEAM Model in the Inpatient Prospective Payment System (IPPS) Proposed Rule. The TEAM Model is described beginning on page 1070 of 1902 of the Proposed Rule. It is a mandatory, 30-day acute episodes of care model.

We have expected this rule for some time. It’s been identified in recent Regulatory Calendars, such as this one. 

CMS also put out a Request for Information in the summer of 2023. They have been meeting with experts and thought leaders over the last couple of years as they build out and refine their specialty/episodes strategy.

Select responses to the RFI by stakeholder groups can be found here:

CMS is also seeking additional comment on a number of aspects of their proposal, as they commonly do in Proposed Rules.

CMS shared their 2024 value-based specialty care strategy update in this Health Affairs Forefront piece on April 2, 2024.

There have been successful components of episodic models based on testing done so far. CMS has iterated on those after extensive feedback from stakeholders, including through the RFI, to introduce TEAM.

This below visual summarizes their strategy. In number 2, below, the TEAM Model is the “mandatory Episode-Based Payment Model EBPM), launching in 2026:

TEAM: The Basics

Page 1083 of the pdf of the Proposed Rule (unpublished version on the Federal Register):

If the proposed TEAM is successful, we hope this model would establish the framework for managing episodes as a standard practice in Traditional Medicare. The proposed TEAM includes features that are attentive to operational feasibility for both participants and CMS, such as how often reconciliation would be conducted to minimize administrative burden, a pricing methodology that would be responsive to providers with varying levels of experience and different patient populations, and the selection of episodes with sufficient volume that would warrant standard care pathways during the acute and post-acute care periods of an episode. Any future policy changes to this proposed model test, such as the addition of episode categories, would be implemented through future notice and comment rulemaking.

CMS

Translation: if this model test is deemed successful, it may be expanded as a permanent part of the IPPS.

We also intend to add additional episode categories in future performance years of the model, offering a gradual transition to greater episode accountability, and ultimately capturing a larger proportion of FFS spending in value-based care. We would use future notice and comment rulemaking to add episode categories in future performance years.

CMS

CMS will include five episode types to start, all procedures.

They may be initiated in the IP or OP hospital setting, and the hospitals will hold accountability for cost and quality of care:

  • lower extremity joint replacement

  • surgical hip/femur fracture treatment

  • spinal fusion

  • coronary artery bypass graft

  • major bowel procedure

CMS indicates we should expect they will add additional episode types in the future.

The program will start on January 1, 2026 and end on December 31, 2030.

Participation Selection Methodology:

Participation will be based on Core-Based Statistical Areas (CBSAs), and further, through random selection for hospitals who qualify for inclusion and stratified by experience with episodic models and safety net hospital density.

Expect CMS to likely share the list of hospitals included in the model on or around January 1, 2025.

On voluntary participation:

CMS notes that hospitals participating in the Comprehensive Care for Joint Replacement (CJR) and/or BPCI-A as of December 31, 2025 but who are NOT randomly selected to participate in TEAM may opt into TEAM, but they must choose to participate in ALL episode types.

The button below links to a page with dropdowns for various sections of the Proposed Rule, like the CBSAs, hospital selection methodology, quality, episodes, payment methodology, and more:

Three Participation Tracks

Up to one-year on-ramp to downside risk

All hospitals may choose up to one year in Track 1, which is upside only.

Certain hospitals could opt into Track 2 moving forward with risk and reward lower than that of Track 3, while the rest would move to Track 3, with 20% upside and downside risk.

Pages 1113-1114 of unpublished pdf

Quality Measures and Reporting; Composite Quality Score

Quality measures, CQS adjustment percentages based on Track and either positive or negative reconciliation amounts, and a proposed application of the CQS are found below. They are similar to prior episodic models’ methodologies 👇️ 

page 1178

Page 1221

Page 1222

Pricing and Payment Methodology, Risk Adjustment, Target Price Calculations (full section of Proposed Rule can be found by clicking the above button and choosing the corresponding toggle)

Risk Adjustment

  • Risk adjust episode-level target prices at reconciliation by the following beneficiary-level variables: age group, Hierarchical Condition Category (HCC) count, and social risk. Calculate risk adjustment multipliers fixed for the performance year

  • Calculate a prospective normalization factor based on the data used to calculate the risk adjustment multipliers

  • Apply normalization factor and prospective trend factor and discount factor to the benchmark price to calculate preliminary target prices per episode type and region

Target Prices

  • Rolling 3-years of baselines episodes spending, and roll the 3-year baseline period forward every year

Participants in episode-based payment models have expressed concerns about a concept known as the “ratchet effect” when choosing the baseline period from which to calculate target prices. That is, participants do not want to be penalized for achieving lower spending by having lower target prices in subsequent years. The use of fewer years of the most recent baseline episode spending, as well as more frequent rebasing, will generally decrease target prices more quickly year over year if overall episode spending is decreasing, as opposed to a longer, fixed baseline. However, we need to balance this concern against the likelihood of having inaccurate target prices if we use older baseline episode spending or rebase less frequently.

One way that we propose to mitigate the ratchet effect is that we propose to use a 3-year baseline period and rebase annually. We believe this approach would achieve a balance between having target prices based on sufficiently up-to-date spending patterns but not requiring participants to compete against only the most recent spending patterns.

CMS

  • Weight episode spending from baseline year 1 at 17%, baseline year 2 at 33%, and baseline year 3 at 50%

Regional Target Prices:

  • Provide TEAM participants target prices for each proposed MS-DRG/HCPCS episode type and region based on 100% regional data and prior to each performance year

  • To include a prospective trend factor, with adjustments at reconciliation for beneficiary-level risk adjustment and an adjustment to the prospective normalization factor

Discount Factor

  • Proposal is for a 3% discount factor, similar to many Innovation Center Models

Risk Adjustment

  • Age bracket risk adjustment variable (less than 65 years old 65 to less than 75, 75 to less than 85, 85 and over)

  • HCC count risk adjustment variable called the TEAM HCC count, with a 90-day lookback per beneficiary, beginning on the day prior to the anchor hospitalization or anchor procedure. CMS will determine which HCC flags are assigned and create a count of HCC flags

  • Social risk: full dual eligibility status, either/or state or national Area Deprivation Index (ADI) percentile beyond a certain threshold, or if they qualify for the Medicare Part D Low income Subsidy (LIS)

  • Use baseline data to calculate risk adjustment multipliers prior to the start of the Performance Year, which would allow them to be used to estimate episode-level target prices

  • Calculate multipliers at the MS-DRG level

  • Incorporate prospective normalization factor to the preliminary target prices, which would be subject to a limited adjustment at reconciliation

Model Overlap:

Allowing beneficiaries to receive care under both types of models may maximize the potential benefits to the Medicare Trust Funds and participating providers and suppliers, as well as beneficiaries. Research suggests that shared beneficiaries in episode-based payment models and ACOs can lead to lower post-acute care spending and reduced readmissions https://doi.org/10.1001/jamahealthforum.2021.2131.

Beneficiaries stand to benefit from care redesign that may lead to improved quality for episodes even while also receiving care under these broader models, while entities that participate in other models and programs that assess total cost of care stand to benefit, at least in part, from the cost savings that accrue under TEAM. For example, a beneficiary receiving a procedure under TEAM may benefit from a hospital’s care coordination efforts regarding care during the inpatient hospital stay. The same beneficiary may be attributed to a primary care physician affiliated with an ACO who is actively engaged in coordinating care for all the beneficiary’s clinical conditions throughout the entire performance year, beyond the 30-day post-discharge period of the episode.

CMS

  • A beneficiary could be in an episode in TEAM by undergoing a procedure at a TEAM participant hospital, and be attributed to a provider participating in a total cost of care or shared savings model or program

  • Savings generated on an episode in TEAM and any contribution to savings in the total cost of care model be retained by each respective participant.

    • So episode spending in TEAM would be accounted for in the total cost of care model’s total expenditures, but TEAM’s reconciliation payment amount or repayment amount would not be included in the total cost of care model’s total expenditures

    • The total cost of care model’s savings payments or losses would not be included in the episode spending in TEAM

Later this week in Part Two, I’ll share my takeaways and considerations for clinicians and healthcare delivery, health tech, and health innovation stakeholders.

What does this mean and signal?

How can you prepare?

What are the opportunities?

Downstream impacts

And more…

Don’t miss it!

And remember, reply back to my emails any time! I answer every one of your emails.

All the best,

Dana

Additional Resources:

Physician-Focused Payment Model: Technical Advisory Committee (PTAC). Slides from 2023 listening session