---
kind: "section"
citation: "42 C.F.R. § 512.550"
title: "42"
number: "512.550"
heading: "Reconciliation process and determination of the reconciliation payment or repayment amount."
url: "https://uscodex.org/cfr/42/512.550"
---

# §512.550. Reconciliation process and determination of the reconciliation payment or repayment amount.

- (a) **General.** Providers and suppliers furnishing items and services included in the episode bill for such items and services in accordance with existing Medicare rules.
- (b) **Reconciliation process.** Six months after the end of each performance year, CMS does the following:
  - (1) Performs a reconciliation calculation to establish a reconciliation payment or repayment amount for each TEAM participant.
  - (2) For TEAM participants that experience a reorganization event in which one or more hospitals reorganize under the CCN of a TEAM participant, performs—
    - (i) Separate reconciliation calculations for each predecessor TEAM participant for episodes where the anchor hospitalization admission or the anchor procedure occurred before the effective date of the reorganization event; and
    - (ii) Reconciliation calculations for each new or surviving TEAM participant for episodes where the anchor hospitalization admission or anchor procedure occurred on or after the effective date of the reorganization event.
- (c) **Calculation of the reconciliation amount.** CMS compares the reconciliation target prices described in [§ 512.545](/cfr/42/512.545.md) and the TEAM participant's performance year spending to establish a reconciliation amount for the TEAM participant for each performance year as follows:
  - (1) CMS determines the performance year spending for each episode included in the performance year (other than episodes that have been canceled in accordance with [§ 512.537(b)](/cfr/42/512.537.md?p=b)) for each MS-DRG/HCPCS episode type using claims data that is available 6 months after the end of the performance year.
  - (2) CMS calculates and applies the high-cost outlier cap for performance year episode spending by applying the calculation described in [§ 512.540(b)(4)](/cfr/42/512.540.md?p=b-4) to performance year episode spending for each MS-DRG/HCPCS episode type.
  - (3) CMS applies the adjustments specified in [§ 512.545](/cfr/42/512.545.md) to the preliminary target prices computed in accordance with [§ 512.540](/cfr/42/512.540.md) to calculate the reconciliation target prices for each MS-DRG/HCPCS episode type.
  - (4) CMS aggregates the reconciliation target prices computed in accordance with [paragraph (c)(3)](#c-3) of this section for all episodes included in the performance year (other than episodes that have been canceled in accordance with [§ 512.537(b)](/cfr/42/512.537.md?p=b)) for each MS-DRG/HCPCS episode type.
  - (5) CMS subtracts the performance year spending amount determined under paragraphs [(c)(1)](#c-1) and [(2)](#c-2) of this section from the reconciliation target price amount determined under [paragraph (c)(4)](#c-4) of this section for each MS-DRG/HCPCS episode type.
  - (6) CMS sums the values calculated under [paragraph (c)(5)](#c-5) of this section across all MS-DRG/HCPCS episode types to determine the reconciliation amount.
  - (7) **Exception for low volume hospitals—** CMS caps the performance year spending amount for each MS-DRG/HCPCS episode type determined under paragraphs [(c)(1)](#c-1) and [(2)](#c-2) of this section to equal the reconciliation target price computed in accordance with [paragraph (c)(3)](#c-3) of this section for episode categories where the TEAM participant did not meet the low volume threshold of at least 31 episodes during the 3-year baseline period. Low volume hospital episodes, including episode categories where CMS caps performance year spending, are included in the CQS, as calculated in [§ 512.547(b)](/cfr/42/512.547.md?p=b), and stop-loss/stop-gain thresholds, as applied at [paragraph (e)](#e) of this section.
- (d) **Calculation of the quality-adjusted reconciliation amount.** CMS adjusts the reconciliation amount based on the Composite Quality Score as follows:
  - (1) CMS calculates a CQS adjustment percentage based on a TEAM participant's CQS, computed in accordance with [§ 512.547(b)](/cfr/42/512.547.md?p=b).
    - (i) CMS applies a CQS adjustment percentage up to 10 percent for positive reconciliation amounts for TEAM participants in Track 1.
    - (ii) CMS applies a CQS adjustment percentage up to 10 percent for positive reconciliation amounts and up to 15 percent for negative reconciliation amounts for TEAM participants in Track 2.
    - (iii) CMS applies a CQS adjustment percentage up to 10 percent for positive reconciliation amounts and up to 10 percent for negative reconciliation amounts for TEAM participants in Track 3.
  - (2) CMS multiplies the CQS adjustment percentage, computed under [paragraph (d)(1)](#d-1) of this section, by the TEAM participant's positive or negative reconciliation amount calculated in [paragraph (c)](#c) of this section to construct the CQS adjustment amount.
  - (3) CMS subtracts the CQS adjustment amount, computed from [paragraph (d)(2)](#d-2) of this section, from the positive or negative reconciliation amount calculated in [paragraph (c)](#c) of this section to construct the quality-adjusted reconciliation amount.
- (e) **Calculation of the net payment reconciliation amount (NPRA).** CMS applies stop-loss and stop gain limits to the quality-adjusted reconciliation amount computed in [paragraph (d)](#d) of this section to calculate the NPRA as follows:
  - (1) **Limitation on loss.** For TEAM participants in Track 3, except as provided in [paragraph (e)(3)](#e-3) of this section, the repayment amount for a performance year cannot exceed 20 percent of the aggregated reconciliation target price amount calculated in [paragraph (c)(3)](#c-3) of this section for the performance year. The post-episode spending calculation amount in [paragraph (f)](#f) of this section is not subject to the limitation on loss.
  - (2) **Limitation on gain.**
    - (i) For TEAM participants in Track 1, the reconciliation payment amount for a performance year cannot exceed 10 percent of the aggregated reconciliation target price amount calculated in accordance with [paragraph (c)(3)](#c-3) of this section for the performance year.
    - (ii) For TEAM participants in Tracks 2, the reconciliation payment amount for a performance year cannot exceed 5 percent of the aggregated reconciliation target price amount calculated in accordance with [paragraph (c)(3)](#c-3) of this section for the performance year.
    - (iii) For TEAM participants in Track 3, the reconciliation payment amount for a performance year cannot exceed 20 percent of the aggregated reconciliation target price amount calculated in accordance with [paragraph (c)(3)](#c-3) of this section for the performance year.
    - (iv) The post-episode spending amount calculated in accordance with [paragraph (f)](#f) of this section is not subject to the limitation on gain.
  - (3) **Limitation on loss for certain providers.** For performance years 2-5, the repayment amount for a TEAM participant in Track 2 defined at [§ 512.505](/cfr/42/512.505.md), must not exceed 5 percent of the aggregated reconciliation target price amount calculated in accordance with [paragraph (c)(3)](#c-3) of this section.
- (f) **Post-episode spending calculation.** CMS calculates the post-episode spending amount as follows: If the average post-episode spending amount for a TEAM participant in the performance year being reconciled is greater than 3 standard deviations above the regional average post-episode spending amount for the performance year, then the post-episode spending amount that exceeds 3 standard deviations above the regional average post-episode spending amount for the performance year is subtracted from the NPRA for that performance year.
- (g) **Calculation of the reconciliation payment or repayment amount.**
  - (1) CMS applies the results of the post-episode spending calculation set forth in [paragraph (f)](#f) of this section to the NPRA as follows:
    - (i) For TEAM participants whose post-episode spending amount does not exceed the limit calculated in [paragraph (f)](#f) of this section, the reconciliation payment or repayment amount is equal to the NPRA.
    - (ii) If the TEAM participant's post-episode spending exceeds the limit calculated in [paragraph (f)](#f) of this section, CMS subtracts the amount of post-episode spending exceeding the limit from the NPRA to calculate the reconciliation payment or repayment amount.
  - (2) If the amount calculated in [paragraph (g)(1)](#g-1) of this section is positive, the TEAM participant is owed a reconciliation payment in that amount, to be paid by CMS in one lump sum payment.
  - (3) If the amount calculated in [paragraph (g)(1)](#g-1) of this section is negative, CMS determines the repayment amount as follows:
    - (i) **For TEAM participants in Track 1, the TEAM participant does not owe a repayment amount.**
    - (ii) For TEAM participants in Track 2 or Track 3 for Performance Years 1-5, as applicable, the Team participant owes that amount as a repayment to CMS.
- (h) **TEAM reconciliation report.** CMS issues each TEAM participant a TEAM reconciliation report for the performance year. Each TEAM reconciliation report contains the following:
  - (1) **The total performance year spending for the TEAM participant.**
  - (2) **The TEAM participant's reconciliation target prices.**
  - (3) **The TEAM participant's reconciliation amount.**
  - (4) The TEAM participant's composite quality score calculated in accordance with [§ 512.547(b)](/cfr/42/512.547.md?p=b).
  - (5) **The TEAM participant's quality-adjusted reconciliation amount.**
  - (6) **The stop-loss and stop-gain limits that apply to the TEAM participant.**
  - (7) **The TEAM participant's NPRA.**
  - (8) **The TEAM participant's post-episode spending amount, if applicable.**
  - (9) The amount of any reconciliation payment owed to the TEAM participant or repayment owed by the TEAM participant to CMS for the performance year, if applicable.

## Notes

### Amendments

[89 FR 69914, Aug. 28, 2024, as amended at 90 FR 37207, Aug. 4, 2025]

### Source

Source: 89 FR 69914, Aug. 28, 2024, unless otherwise noted.

### Authority

Authority: 42 U.S.C. 1302, 1315a, and 1395hh.

### Source

Source: 85 FR 61362, Sept. 29, 2020, unless otherwise noted.

### Amendments

[89 FR 69914, Aug. 28, 2024, as amended at 90 FR 37207, Aug. 4, 2025]