Bundled Payments: What You Need to Know

October 04, 2015


Types of Bundled Payments

Episode-based payment, evidence-based case rate, and global bundled payment, among others, are all different terms used for describing Bundled Payments. These all refer to the reimbursement method to providers, from hospitals to surgeons, based on the expected costs associated with the entire episode of care for each patient’s procedure.

Put simply, bundled payments mean: that no matter how many services the patient receives over the course of a single episode of care (90 days), the provider is reimbursed at a set target price.

Historically, many providers were reimbursed on a fee-for-service basis, which reimburses providers for each service performed. While not often the case, this can lead to abuse of the system in which providers administer more services to increase revenue. Fee-for-service, in some cases, also resulted in fragmented care as providers of different services had little coordination with one another.

As healthcare has shifted to a value-driven model with the Affordable Care Act, The Centers for Medicare & Medicaid Services (CMS) have adopted the Bundled Payments for Care Improvement (BPCI) initiative to improve patient care and decrease unnecessary spending. Some of the advantages of bundled payments are the increased communication of patient-care protocols between providers, such as avoiding duplicate testing, to ensure adequate care is being provided at every level. As the providers begin utilizing this method, economies of scale would be encouraged to utilize standard sets of medical supplies for a certain procedure across every operation in each health system to where they could negotiate bulk orders of supplies.


Medicare piloted bundled payment programs in 2013 that were both voluntary programs and regulatory mandates. In the two years these programs have been rolling out, providers have identified several disadvantages in the current programs.

These include:

  • Providers avoiding high-risk patients because of the potential loss on margins
  • Improving margins by limiting access to specialists during patient stay
  • Difficult tracking of financial accountability between providers throughout an episode of care
  • Diseases difficult to identify episode of care procedures around
  • Patients with overlapping bundles because of multiple diseases
  • Unnecessary episodes of care not discouraged
  • Uncertain of effect on health outcomes

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