Bundled Payments

Bundled payments are value-based payment models used to maintain health care quality while reducing costs and increasing efficiency. In a bundled payment, health care providers are reimbursed based on the expected costs for specific episodes of patient care. This differs from fee-for-service, or volume of care, in which providers are paid for each service they provide to a patient, and capitation, in which providers are paid a lump sum per patient regardless of the number of services the patient receives. However, whether bundled payments can help health systems achieve cost-effective, quality service through coordinated care is still uncertain.

Bundled payments are more than simply grouping together commonly associated services. The goal of bundled payments is to provide a better level of care for patients by creating a structure that recognizes physicians as the clinical leaders and keeps physician risk manageable by paying for the value of care rather than the volume of care.

At its core, a bundled payment is reimbursement for clinically defined episodes of care. These episodes of care can be simple, like a stress test administered by a single provider, or complex, like a one-year payment for cancer treatment that includes multiple providers and settings of care.

As the health care system shifts from a volume-based payment model to value-based payment model, bundled payments are growing in use. This shift is evident in the U.S. Department of Health & Human Services’ announcement to tie “30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models” by the end of 2016, and to tie “50 percent of payments to these models by the end of 2018.”

There is the potential, however, that bundled payments may have unintended consequences, including underutilization of needed, but costly, services or avoiding caring for the sickest patients. Bundled payments tend to lower the amount of reimbursement to individual providers, incentivizing providers to use fewer and lower-cost services.

bundled payments