Track 1 to Track 3: One Quarter Left Before TEAM Downside Risk

R.A.I.N. Compliant Briefing Series

Track 3 Begins

January 1, 2027

Hospitals Affected

721

Maximum Downside

20% of episode target

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In the latest edition of Rainfall's R.A.I.N. Compliant Briefing Series, we outline the trends expected from the track adjustment and how health systems can protect themselves from any further revenue loss.

Most of the 721 hospitals on the TEAM list will not choose to make the switch from Track 1 to Track 3. It is scheduled for them. The hospitals most exposed are not necessarily those with the weakest care, Rainfall says. They are the ones that cannot tell which direction they are trending.

The Numbers Behind the Deadline

721

Hospitals on the CMS TEAM List

For most of them, Track 3 is the default starting January 1, 2027.

Up to 20%

of the episode target a hospital can owe CMS under Track 3

Track 10% · No Repayment

Track 3

10% to 20%

The cap on bonuses (stop-gain) doubles from Track 1 to Track 3

Track 1

Track 3

1 quarter

Q4 2026 is the last performance quarter before Track 3 takes effect

Q1Q2Q3Q4

$1.28M

Illustrative Maximum Track 3 Exposure for a Mid-Size Community Hospital

Annual TEAM Episode Payments$6.4M

20%

Maximum Owed to CMS at the 20% Stop-Loss

What Changes on January 1

Track 1 was built as an entry ramp: upside only, so a hospital could earn a bonus for efficient, high-quality episodes but owed nothing if costs ran over target. Track 3 is two-sided. The mechanism that pays a bonus for good performance also collects a penalty for underperformance, and both are capped at 20%.

Beginning in Performance Year 2, CMS requires most TEAM participants to move into Track 3. Track 1 stays available on a limited basis, generally for safety-net hospitals on an extended glide path, and Track 2 is reserved for a narrower set of qualifying rural, safety-net or sole-community hospitals.

Downside · Owed to CMS Upside · Bonus Earned

Track 1PY1 · 2026

No Repayment Risk

Up to 10%

Track 3PY2 onward · 2027+

Up to 20% owed to CMS

Up to 20% bonus

% of Episode Target

−20%−10%0+10%+20%

Track 1 · 2026Track 3 · 2027+

Risk TypeUpside onlyTwo-sided: upside and downside

Who Is on ItAll TEAM hospitals; Track 1 default (Track 3 elective)Default for most of the 721 hospitals on the TEAM list

ReconciliationPeriodic true-up against target price; no clawback exposureSame cadence, now with real financial consequence each cycle

If a Hospital Does NothingNo penalty exposure through PY1Underperformance is billed automatically at reconciliation

A quality adjustment sits on top of the reconciliation amount, so the financial outcome is never just a cost number. It is cost performance filtered through a composite quality score. A hospital drifting on either dimension will not see a single alarming metric. It will see a smaller bonus, then a break-even, then a bill.

Why Hospitals Get Blindsided: A Visibility Problem, Not a Competence Problem

Ask a hospital finance or quality leader whether the organization is trending positive or negative under TEAM, and the honest answer is often “we’re not sure.” Rainfall attributes that to the reporting tools available today, not to the quality of care.

The CMS portal reports what has already happened, on a reconciliation cycle that trails real-time care delivery by months. By the time a report reflects a quarter’s episodes, the decisions behind those numbers are long made. Nothing in the portal flags that a service line, a surgeon group or a post-acute referral pattern is quietly pulling the hospital away from its target price.

Rainfall describes a common failure pattern in four steps:

1. 01 Assume

   A hospital believes it is performing well because nothing has gone visibly wrong.

2. 02 Lag

   Reconciliation data arrives months after the episodes it describes, after the window to intervene has closed.

3. 03 No Urgency

   Under Track 1, a negative trend is uncomfortable but not costly, so it does not prompt action.

4. 04 Penalty

   The same trend, still unaddressed, becomes a Track 3 penalty the moment PY2 begins, with no added warning.

For many hospitals, the switch to Track 3 will be the first time the numbers show up as a debit instead of a missed bonus.

What the Exposure Looks Like

The same underperformance that costs a hospital nothing in Q4 2026 becomes a bill when PY2 opens on January 1, 2027, and Track 3 reconciliation cycles do not pause to let a hospital catch up mid-year. Rainfall’s illustrative math, which is not a projection for any specific hospital, shows the scale of the maximum 20% exposure:

Mid-Size Community HospitalModerate joint-replacement and spinal fusion volume

$1.28MMax Exposure

$6.4M in annual TEAM episode payments

High-Volume Surgical ProgramOrthopedic and cardiac, 300–700+ joint replacements a year

$5M–$8M+Max Exposure

$25M–$40M+ in annual TEAM episode payments

• Max Owed to CMS (20%)
• Annual TEAM Episode Payments
• Upper Range

Every quarter a hospital spends unsure of its trend line is a quarter in which that exposure compounds, unaddressed, toward a fixed date.

What Hospitals Can Do in Q4

Rainfall says a quick gut check is the place to start. Its five-minute self-assessment asks leaders whether they can state, as of this month:

“Most hospitals don’t get to choose Track 3. It’s a date on the calendar. The ones that walk into January knowing their trend line will have a plan. The ones that don’t will find out from a reconciliation report, after the window to change anything has closed.”

Rainfall is opening a limited number of Q4 2026 onboarding slots for its R.A.I.N. Compliant™ platform, because a Q1 2027 start leaves no runway to change a trend before the first Track 3 reconciliation cycle. The company outlines the glide path to January 1 this way:

1. Weeks 1–2 Trend Diagnosis

   Rainfall ingests a hospital’s CMS TEAM data and claims history and reports whether it is trending positive or negative, down to the service line or pathway driving the result.

2. Weeks 3–6 Target-Gap Plan

   A documented, prioritized plan to close the specific gaps identified, built around the hospital’s existing care teams.

3. Weeks 7–10 Implementation Support

   Hands-on work with quality, finance and post-acute teams to put the plan into practice while a quarter of runway remains.

4. January Track 3 Readiness

   The hospital enters PY2 with a known trend line, a working plan and ongoing visibility.

There is no upfront investment. Rainfall succeeds when the hospital succeeds under TEAM.