Medicare’s new hospital payment experiment, which it calls TEAM (Transforming Episode Accountability Mode), may have profound effects on patients, their families, and providers such as nursing homes and home health agencies. While the acronym signals the virtues of collaboration and shared goals, its outcomes are far less certain.

At its best, TEAM will encourage hospitals to improve the quality of the care their patients receive after being discharged. It could result in better coordinated care in what is now a dangerously fragmented system and enhance communication with patients and their families.

But it also risks further burdening already-stressed family caregivers. It also may increase financial pressures on providers such as home health agencies and skilled nursing facilities, which in turn could lower the quality of the care they provide and create even more challenges for families.

Patients and their families can only hope they are discharged from a hospital that has a productive response to the new incentives. Some will. Some inevitably won’t.

What Is TEAM?

TEAM is a mandatory five-year demonstration that makes hospitals responsible for all a patient’s Medicare costs for 30 days after discharge. The idea: Create new incentives for hospitals to continue to manage the care of their patients even after they have been wheeled out the front door.

TEAM is the latest in a long series of experiments generally known as bundled payments. Instead of compensating for each individual test, treatment, or drug, original Medicare pays a hospital a fixed amount for an entire episode of care. Many prior models, which were optional for hospitals and physician practices, failed.

Until now, those models generally applied only to costs inside the hospital. For instance, Medicare would pay, say, $10,000 for the all the components of a surgery, including the operating room, the surgeon, anesthesia, and any inpatient stay. But usually not for costs after discharge.

A Complex Model

Medicare also has tried to improve post-acute care by hitting hospitals with financial penalties if patients are readmitted for the same condition within 30 days after discharge. Think of TEAM as readmission penalties on steroids.

It applies to all costs both inside and outside the hospital for those 30 days after discharge. To start, the system will apply to five common procedures, including hip fracture repairs; spinal fusions; and open-heart, major bowel, and orthopedic surgeries such as knee replacements. More than 740 hospitals in 188 metropolitan areas serving about one-quarter of all Medicare beneficiaries are covered by the model, which began on January 1.

The Centers for Medicare and Medicaid Services estimates Medicare spent about $18 billion on these surgeries for 900,000 patients in 2022.

TEAM is extremely complicated. But in effect, if total costs over the 30 days after discharge exceed a fixed government benchmark, the hospital must pay Medicare the difference. If the costs are lower than the target, the hospital (and perhaps its partner providers) keep the savings.

The target prices are adjusted for geographical location, the age and overall health of the patient, and many other factors. Patient outcomes also are factored in the benchmark price.  Hospitals can participate in one of three levels of financial risk.

Think of it this way: Imagine mom breaks her hip and her injury is repaired at the hospital. Medicare calculates a target price for the full cost of her care, including the surgery itself, the hospital stay, and all post-discharge services including primary care, rehab, durable medical equipment, x-rays, medications, home health, or skilled nursing care. That’s the benchmark hospitals need to beat.

What Will It Mean For Families?

According to a study in the American Journal of Managed Care, participating hospitals will lose an average of about $560 per surgery. But there will be a lot of variation, with 62% losing an average of $1,350 per episode, and 38% gaining an average of about $900.

What will it mean for families when participating hospitals try to turn that risk of loss into a profit?

Some will acquire or partner with skilled nursing facilities or home health agencies. New acquisitions would be a stunning reversal of the recent trend where health systems, especially non-profits, have been shedding their nursing facilities

Hospitals may use the model as an opportunity to create new efficiencies and perhaps push their partner providers to deliver better post-discharge care at a lower price. But others may just squeeze quality, as well as cost, out of their partners.

In-network home health agencies and skilled nursing will be faced with the same choice they now have with Medicare Advantage: Accept lower payment in return for volume. That will only add to the financial burden of already strapped facilities.

Alternatively, hospitals may discharge more patients home, rather than to a nursing facility. That may benefit many patients and often would be their preference. But unless the hospital provides additional training and support, it also will add to the burden on family members. In effect, they will be expected to provide even more complex care to their loved ones. At no cost to the hospital.

One unanswered question: What will TEAM mean for families who want to use unlicensed paid aides for care at home?  In rural communities, for example, there often are no other options.

As professional football fans know, there are successful teams who go to the playoffs year after year and even win multiple Super Bowls. Then, there are the annual doormats. We will know soon enough if this TEAM looks more like a dynasty or the New York Jets.