Mandatory Medicare bundled payments and respiratory disease reporting are on the way for hospitals

Hospitals in nearly a quarter of U.S. markets soon will be required to participate in a Medicare bundled payment model covering five surgical procedures, CMS said in newly released regulations.

The model is among several policies of note in Medicare’s FY25 final rule for hospital inpatient care and long-term care hospitals. See this previous article for details on forthcoming changes to payments.

Mandatory bundled payments for surgical procedures

The Transforming Episode Accountability Model (TEAM), which was proposed earlier this year, is set to run from Jan. 1, 2026, through 2030 for hospitals in roughly 190 randomly selected markets, technically called core-based statistical areas (CBSAs). See the table beginning on page 1885 of the pre-published rule PDF for a list of selected CBSAs.

Aug. 8 correction: The above paragraph was updated with the correct page number.

The chosen markets represent 23.4% of all CBSAs. Other hospitals can voluntarily participate if they take part in the Comprehensive Care for Joint Replacement model or the Bundled Payments for Care Improvement Advanced model through the conclusion of those programs.

Similar to the prior bundled payment models, TEAM will put hospitals at risk for ensuring coordinated, high-quality care for Medicare beneficiaries undergoing the following procedures in both inpatient and outpatient settings:

• Lower-extremity joint replacement
• Surgical hip femur fracture treatment
• Spinal fusion
• Coronary artery bypass graft
• Major bowel procedure

Post-procedure referrals to primary care will be required.

The model includes three tracks with progressively greater levels of risk and reward and gives safety-net hospitals the option to avoid the high-risk tier. Hospitals will receive a bonus or owe a penalty depending on whether they stay under the target price for the procedure, with performance on quality metrics factoring in.

In a comment letter, the American Hospital Association (AHA) said the model should not be implemented in its proposed form. Due to design flaws that emphasize risk over the opportunity for shared savings, the model amounts to a “backdoor payment cut to hospitals, as it fails to provide hospitals a fair opportunity to achieve enough savings to garner a reconciliation payment,” the AHA wrote.

The five procedures constituted more than 11% of inpatient payments in 2023, meaning structural problems with the model will have significant repercussions for hospital finances, the AHA noted.

Data-reporting obligations as a Medicare CoP

A new Medicare condition of participation (CoP) requires hospitals and critical access hospitals to renew patient-data reporting in relation to respiratory diseases. Pandemic-era reporting requirements ended April 30.

“Not maintaining this reporting would result in an absence of vital information on local, regional and national transmission and impact of respiratory illness and overall healthcare system capacity, with significant implications for both patient care and public health mitigation,” CMS wrote in the final rule.

Beginning Nov. 1, hospitals must electronically report specified data pertaining to COVID-19, influenza and respiratory syncytial virus. Reporting will be required weekly, with data elements set to include:

• New hospital admissions for adult and pediatric patients with confirmed respiratory illnesses, by age range
• Staffed bed capacity and occupancy both as overall rates and broken down by hospital setting and population group (adult/pediatric)
• Limited patient demographic information, including age

The admissions data will be reported as weekly totals, with other categories reported as single-day snapshots each week. Reporting is to take place through the CDC’s National Health Safety Network.

CMS noted that “a few” hospital associations expressed concerns about establishing data reporting as a CoP. The agency responded that since COVID-19 mandatory reporting ended in April, reporting rates have dropped from nearly 100% of hospitals to roughly 35% that continue to do so voluntarily. Several states have no reporting, hampering visibility into the burden of respiratory illness.

An initiative to capture expanded demographic data was left out of the final rule, although CMS acknowledged there would be a void in epidemiological information. The agency said future rulemaking could address this issue.

Residency positions for teaching hospitals

The final rule also includes policies governing the application and awards processes for an additional 200 graduate medical education slots that will be distributed by Jan. 31, 2026, and take effect the following July 1. The slots are scheduled to go to:

• Rural hospitals or hospitals treated as rural
• Hospitals at which the reference resident limit is greater than the otherwise applicable limit
• Hospitals in states with new medical schools or additional locations and branches of existing medical schools
• Hospitals serving designated health professional shortage areas (HPSAs)

Each of the categories will receive at least 10% of the slots, with prioritization subsequently going to hospitals serving designated HPSAs. At least 100 slots will be distributed for psychiatry or related subspecialties.

Among the criteria for assigning the available slots is whether an applicant has a “demonstrated likelihood” of filling the positions within the first five training years after the distribution. Applicants can demonstrate that likelihood by showing they lack room under their current FTE resident cap to launch or expand a residency program. Worksheet E Part A and Worksheet E-4 from a hospital’s cost report are to be submitted as part of the application.

Applications for the slots are due by March 31, 2025.