rcm glossary

Bundled payment

Bundled payment is a reimbursement model where healthcare providers receive a single payment for a group of services related to a specific episode of care.

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What is Bundled Payment?

Bundled payment, also known as episode-based payment or episode-of-care payment, is a reimbursement model in healthcare where a single payment is made to cover all the services and treatments related to a specific episode of care or medical condition. In this payment model, healthcare providers, such as hospitals, physicians, and post-acute care providers, receive a fixed amount of money for all the services provided during a defined period, typically spanning from the initial diagnosis to the completion of treatment or recovery.

Bundled payment is designed to promote coordination and collaboration among healthcare providers by incentivizing them to work together to deliver high-quality care while reducing costs. This payment approach shifts the focus from the traditional fee-for-service model, where providers are paid separately for each service rendered, to a more integrated and value-based system.

Difference between Bundled Payment and Fee-for-Service

Bundled payment differs significantly from the fee-for-service (FFS) reimbursement model, which has been the predominant method of payment in healthcare for many years. In the FFS model, providers are paid for each individual service or procedure they perform, leading to fragmented care and potentially unnecessary or duplicative services. This model often incentivizes volume over value, as providers are rewarded for the quantity of services delivered rather than the quality or outcomes achieved.

On the other hand, bundled payment encourages a more coordinated and patient-centered approach to care delivery. By providing a single payment for an entire episode of care, bundled payment aligns the financial incentives of all providers involved, promoting collaboration and accountability. This model encourages providers to focus on delivering efficient, high-quality care that produces positive patient outcomes while reducing unnecessary utilization and costs.

Difference between Bundled Payment and Capitation

While bundled payment and capitation share some similarities, they are distinct payment models with different structures and objectives. Capitation is a payment model where healthcare providers receive a fixed amount per patient per month or year, regardless of the services provided. This model transfers the financial risk from payers to providers, as providers are responsible for managing the healthcare needs of their assigned population within the allocated budget.

In contrast, bundled payment focuses on specific episodes of care rather than the overall healthcare needs of a population. Providers are paid a fixed amount for a defined set of services related to a particular medical condition or treatment. Bundled payment allows for greater flexibility and customization compared to capitation, as it can be applied to specific procedures, conditions, or timeframes.

Examples of Bundled Payment

Bundled payment has been implemented in various healthcare settings and for a range of medical conditions and procedures.

Here are a few examples of bundled payment initiatives:

1. Comprehensive Joint Replacement (CJR) Model:

Under this initiative introduced by the Centers for Medicare and Medicaid Services (CMS), hospitals in certain geographic areas are required to participate in a bundled payment program for hip and knee replacements. The bundled payment covers all services related to the joint replacement surgery, including pre-operative care, the surgery itself, and post-operative rehabilitation. The goal is to improve the quality of care and reduce costs by incentivizing hospitals to coordinate care across the entire episode.

2. Oncology Care Model (OCM):

The OCM is a bundled payment program specifically designed for cancer care. Participating practices receive a monthly payment per beneficiary to cover all services related to chemotherapy administration, supportive care, and other cancer treatments. The model aims to improve care coordination, enhance patient experience, and reduce the total cost of cancer care.

3. Bundled Payments for Care Improvement (BPCI) Advanced:

BPCI Advanced is an initiative by CMS that offers bundled payment options for a wide range of clinical episodes, including both inpatient and outpatient services. Participating providers enter into payment arrangements that cover multiple services, such as hospital stays, physician visits, and post-acute care. The program encourages providers to collaborate and innovate in delivering high-quality, cost-effective care.

These examples illustrate how bundled payment can be applied to different healthcare scenarios, promoting care coordination, cost containment, and improved patient outcomes.

In conclusion, bundled payment is a reimbursement model that provides a single payment for all services and treatments related to a specific episode of care. It differs from fee-for-service by incentivizing collaboration and value-based care delivery, and it is distinct from capitation by focusing on specific episodes rather than overall population health. Bundled payment initiatives have been implemented in various healthcare settings, aiming to improve care coordination, enhance patient experience, and reduce costs.

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