TEAMing Up Against Medicare and Medicaid Cuts: A Smarter Way Forward
Hospitals across the country are scrambling to prepare for the impact of the One Big Beautiful Bill Act (OBBBA), officially known as the 2025 Federal Budget Reconciliation Act.
Designed to curb federal spending, the bill introduces cuts to both Medicaid and Medicare—two lifelines that have historically provided reliable revenue for hospitals navigating razor-thin margins.
These cuts will be phased in over the next two years, with the most severe impacts hitting in 2028. Among the most disruptive provisions are steep new limits on Medicaid provider taxes and Directed Payment Programs (DPPs). For health systems with high exposure to Medicaid, the result will be a multi-year revenue headwind of 1–2% annually. In some states, DPP reductions alone could shrink supplemental payments by up to 70% over the next decade.
The consequences will be especially dire for rural hospitals and those with large Medicaid patient populations. As margins narrow further, many are being forced to consider painful choices: cutting services, laying off staff, or even shutting their doors altogether.
With limited levers to pull, hospital leaders can’t exactly raise prices or change reimbursement rates, so the question becomes: how will they replace that revenue?
The Hidden Opportunity in the TEAM Program
Right now, hospitals are laser-focused on responding to the OBBBA. But in the process, many are missing a critical opportunity that’s hiding in plain sight: CMS’ Transforming Episode Accountability Model (TEAM).
Set to launch at the beginning of 2026, TEAM is being viewed by many as just another burden—another set of requirements that will chip away at hospital budgets. Because there’s no financial risk in year one, most systems are kicking the can down the road. But waiting may be a costly mistake.
What many hospital leaders don’t realize is that TEAM, if approached strategically, can serve as a powerful offset to the revenue hospitals are about to lose. The program is not just about compliance—it’s about coordination, efficiency, and unlocking shared savings. But you have to know how to engage with it early and intentionally.
Unfortunately, there’s a widespread misunderstanding of what TEAM actually entails. Some executives equate it with case management, while others are unaware of the significant reporting and infrastructure requirements. We’ve spoken to major hospital systems who didn’t even plan to begin TEAM discussions until Q4 of this year. By then, it may be too late.
Why Waiting Is Risky (Even If You Weren’t Selected)
Even hospitals not selected for the TEAM program need to be paying attention. As former Veterans Affairs Secretary Dr. David Shulkin put it in a Modern Healthcare article:
“This is a signal of things to come. These are skills and toolsets that hospitals should be thinking about developing and sharpening up, whether they're in the TEAM model or not.”
The reality is that TEAM is a blueprint for the future of care coordination, and a potential path to reclaim lost revenue if approached with the right mindset and strategy. But seizing that opportunity requires action now, not later.
Hospitals need to begin contingency planning, not only to weather the storm of Medicare and Medicaid cuts but to thrive in a healthcare environment that’s becoming increasingly value-driven.
The Cost of Inaction
If hospitals delay planning, they’ll find themselves in an even more precarious position.
Tighter margins will inevitably impact the quality of care for all patients, not just those on government insurance. Expect to see more care deserts, closed departments, and reduced access to specialty services—especially in already underserved communities.
This is about ensuring hospitals can continue to serve their communities effectively.
Despite some skepticism, CMS’ TEAM is a smart program. It’s designed to improve outcomes, strengthen care, and lower long-term system costs. For hospitals willing to embrace the spirit of the program, TEAM can be a much-needed bright spot in an otherwise bleak financial forecast.
Don’t Wait. Plan Now.
Hospitals are understandably triaging the most immediate threats. But that approach may come at the expense of long-term stability. TEAM isn’t a penalty—it’s a lifeline. And with the right partner, hospitals can use it to chart a sustainable path forward.