ACS Expresses Concerns about Episode-Based Payment Model
The Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2025 Inpatient Prospective Payment System (IPPS) final rule on August 1. The ACS submitted comments on June 10 in response to the Agency’s IPPS proposed rule issued earlier in the year.
Within the final rule, CMS finalized various policies relevant to surgeons, including a 2.9% increase in payments for hospital inpatient services, changes to Medicare Severity Diagnosis-Related Groups (MS-DRGs) and OR versus non-OR designations for certain surgical procedures, and new and updated quality metrics.
Most notably, CMS finalized a mandatory episode-based payment model, the Transforming Episode Accountability Model (TEAM). TEAM will begin in January 2026 and last for 5 years, and it will include the following surgical episodes:
- Lower extremity joint replacement
- Surgical hip and femur facture treatment
- Spinal fusion
- Coronary artery bypass grafts
- Major bowel procedures
Performance on an episode is determined by comparing a hospital’s target price to its actual Medicare fee-for-service spending and by evaluating its performance on certain quality measures, including hospital readmission, patient safety, and patient-reported outcomes. Participation will be mandatory for all hospitals within select Core-Based Statistical Areas (CBSAs), as designated by CMS, and incorporate different levels of risk and reward for participants. All participants will have the option to participate with no downside risk for the first year, and safety net hospitals will be able to do so for up to 3 years.
The ACS has been a strong advocate for using episodes as a glide path to incentive high-value care, but the College had many concerns with the proposed TEAM, most notably the mandatory participation requirement and the lack of meaningful quality metrics. The ACS urged CMS to develop a quality framework that maps to each episode, stating that the current model will not identify distinction in quality performance within these episodes and will not drive substantive improvements in care as CMS intends.
In response to TEAM being finalized, the ACS is actively exploring options for developing resources that will help inform hospitals and surgeons affected by the mandatory model. An analysis of the final proposal is underway that will leverage existing relationships with experts in episodes and cost measurement. Reports and resources from this analysis could be invaluable to helping quality partners selected as participants to identify opportunities for greater efficiency, thereby avoiding penalties and succeeding in the model.
The final rule and fact sheet are available online for public review. There is also a TEAM fact sheet and website. Contact regulatory@facs.org for more information.
