CMS Just Gave Hospitals a Pay Bump but Now They’re on the Hook for What Happens After Discharge
The feds are handing hospitals $5B but they’re also handing them the bill for what happens after the patient leaves.
Last week, CMS finalized a 2.6% Medicare payment increase for acute care hospitals, roughly $5 billion in new funding. But hospitals counting this as a win should look twice. Tucked inside the same rule is a fundamental shift in accountability. Starting in 2026, hospitals won’t just be responsible for what happens inside their walls. They’ll be graded and paid on what happens 30 days after the patient walks out the door.
That’s the premise behind CMS’s new Transforming Episode Accountability Model (TEAM). It requires hospitals to manage costs, outcomes, and patient experience across the full post-discharge episode for five common surgical procedures. That includes readmissions, patient-reported outcomes, and even satisfaction scores like Press Ganey.
Welcome to the age of full episode accountability. Most hospitals aren’t ready.
Why CMS’s Raise Isn’t Really a Raise
The 2.6% bump is immediately diluted by productivity cuts and inflationary pressures, especially on labor. CMS just set the national labor related share at 66% and health systems are already struggling to staff inpatient units. Now they’re expected to build coordinated post acute care pathways too?
Hospitals that can’t prove value post discharge may lose more in penalties and readmissions than they gain in reimbursement.
The Real Challenge Starts the Moment Patients Leave
TEAM flips the incentive model. It’s no longer about doing more procedures. It’s about keeping patients well after the procedure. That means:
- Building networks of post acute partners
- Managing hybrid reporting across Medicare Advantage and fee-for-service
- Tracking and improving outcomes in real time
Most health systems don’t have the infrastructure or the staff for that.
And that’s why transitional care is becoming the next cost center.
Where Transitional Care Models Are Already Working
Forward thinking systems aren’t waiting for TEAM to hit. They’re already offloading post discharge care to virtual physician-led models that scale without adding brick and mortar or burdening in-office clinicians.
At Jersey City Medical Center, the model includes:
- Outreach within 12 hours of discharge
- Comprehensive virtual follow up from licensed clinicians
- Risk stratification based on medical and social data
The result: fewer avoidable readmissions, better alignment with TEAM quality metrics, and less staff burnout.
At a time when every dollar counts and every readmission matters, hospitals are increasingly turning to physician-led, virtual first models like the one Dimer Health piloted in New Jersey to meet TEAM goals before they become mandatory.
The Big Question: How Do You Turn a 2.6% Bump Into Real Value?
Hospitals can’t afford to treat this payment increase as a cushion. It’s a signal. CMS is betting that hospitals can do more with less but only if they modernize.
The path forward isn’t more beds or more staff. It’s redesigning how care continues at home, where clinical outcomes and financial incentives now intersect.
By 2026, hospitals won’t just be judged on how well they operate the OR. They’ll be judged on how well they operate the recovery.
Is your post discharge strategy ready?
