bundled payment


Earlier, healthcare providers were reimbursed by insurance companies and governmental agencies for different procedures used in the service provided. This was under fee-for-service healthcare system. Many agree that fee for service has not only increased healthcare costs but has also affect quality care.

In Fee-for-value healthcare system third-party payers reimburse healthcare providers to deliver the best value based on successful outcomes.

In this new era of healthcare, to eliminate the fee for service payments, an alternative method like bundled payments was introduced which is now defining the future of revenue cycle management. Bundled payments are the forefront of payment reform as it leads to higher quality and more coordinated care at lower cost to Medicare. Bundled payment is somewhere between fees for service reimbursement and capitation which reduces healthcare costs.


Bundled payments, which was first introduced as an optional program has now become mandatory for healthcare professionals and organizations. In 2012, it was discovered that almost one-third of United States reimbursement used the bundled payment program.

In 2013, CMS launched the Bundled Payments for Care Improvement (BPCI) initiative, a program that was designed to test whether paying per episode of care can reduce Medicare costs while maintaining or improving quality of care.

 In 2015, CMS made a 90 day bundled program model mandatory as a new program for Medicare beneficiaries undergoing Joint Replacement under Comprehensive care for joint replacement initiative(CJR) to improve cost efficiencies and collaboration among providers.

Between 2016 and 2017, CJR bundled program model resulted in a spending reduction of $1,084 per episode. Further, it was concluded that the net savings were $212 a piece, or a decline of 0.7%.

Pros and Cons:

There are many advantages of bundle payments:

  • Bundled payments give providers strong incentives to keep their costs down.
  • Bundled payments encourage collaboration across diverse providers and institutions.
  • Bundles target the work of specialists to participate in value-based payment arrangements.
  • More importantly, bundle payments include a meaningful product called clinical episode which helps to create markets in which providers directly compete on quality and price.

However, there are some drawbacks too:

  • It can be difficult to identify the type of care that should be included in the bundled payments for which a given provider is at risk.
  • When patients have multiple chronic conditions, it becomes a matter of question whether the bundle should include the costs of caring for all those problems or not?
  • Monitoring these interactions is a tedious process and could  increase administrative costs.

BPCI Advanced Model:

bundled payment

In 2018, CMS introduced BPCI Advanced, which is a voluntary episode payment model. It is completely based on total cost of care concept. Some of the quality measures adopted by CMS for BPCI Advanced Model are:

  • Perioperative Care: Selection of Prophylactic Antibiotic: First or Second-Generation Cephalosporin (NQF #0268)
  • Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550)
  • Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft Surgery (NQF #2558)
  • Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (NQF #2881)
  • AHRQ Patient Safety Indicators (PSI 90)

BPCI Advanced is a voluntary model with 90-day episode duration.

Some of the important points regarding BPCI Advanced are:

  1. It includes 32 clinical episodes, with 29 in the inpatient setting and three in the outpatient setting.
  2. Under the program, provider payments will be based on quality performance during a 90-day episode of care.
  3. A clinical episode will begin at the start with “anchor stay,” or at the beginning of an outpatient procedure, the “anchor procedure.”
  4. The clinical episode will end 90 days after the end of the anchor stay or the anchor procedure.


  • It aims to Support and encourage Participants, Participating Practitioners, who are interested in continuously reengineering care.
  • It aims to Decrease the cost of each Clinical Episode by eliminating unnecessary care and increasing care coordination.
  • It promotes rapid development of new evidence-based knowledge
  • It   provides better health at lower cost through patient education and on-going communication throughout the Clinical Episode.

Clinical Episodes included in BPCI Advanced

Disorders of the liver excluding malignancy, cirrhosis, alcoholic hepatitis (New episode added to BPCI Advanced)

  • Acute myocardial infarction
  • Back & neck except spinal fusion
  • Cardiac arrhythmia
  • Cardiac defibrillator
  • Cardiac valve
  • Cellulitis
  • Cervical spinal fusion
  • COPD, bronchitis, asthma
  • Combined anterior posterior spinal fusion
  • Congestive heart failure
  • Coronary artery bypass graft
  • Double joint replacement of the lower extremity
  • Fractures of the femur and hip or pelvis

Who can participate?

Only ACHs and PGPs can be Episode Initiators (EI). An EI can participate as a Convener or NonConvener. A Non-Convener bears risk only for itself, whereas a Convener brings multiple EIs together and bears and apportions financial risk for all Participants. Medicare-enrolled providers or suppliers, Physician Group Practices (PGPs), eligible entities that are not enrolled in Medicare, and Acute Care Hospitals (ACHs) may all participate as convener participants. During the Model, if two PGPs merge under a TIN that is participating in BPCI Advance, they can continue to participate. If two hospitals merge under a CMS Certification Number (CCN) that is participating, they can continue to participate.

How will quality be measured?

In the first two model years, Participants must report on seven claims-based quality measures. CMS may introduce additional non-claims based measures in future years. For the time being, Participants will not be required to submit quality data to CMS for purposes of BPCI Advanced. Performance will be assessed for each measure at the episode level and rolled up to the EI. These scores will then be used to generate a Composite Quality Score (CQS) and CQS adjustment amount for each Clinical Episode. For the first two model years, any adjustment by the CQS Adjustment Amount to a positive or negative Total Reconciliation Amount will be capped at 10 percent.

How Many Medicare Beneficiaries Have Received Care In Bundled Payment Models?

BPCI Model 1 accounted for over 2,40,000 beneficiary episodes among participating hospitals during its first two years. Models 2-4, for which only first year results are available, accounted for about 61,000 episodes, with the majority (74%) initiated under Model 2. Although beneficiary episodes are not an exact match to the number of beneficiaries receiving care in bundled payment models, it is likely a close estimate. To learn more about the number of beneficiaries in other models and how bundled payment models compare, see the Bundled Payment Side-by-Side comparison tool.

To know more about bundle payments, join us in our upcoming webinar on “Bundle Payments and Case Management in Hospitals” which will be live on 6 March, 2019. In this live webinar the expert speaker Beverly Cunningham, MS, RN, will help participants understand the revenue and reimbursement cycles and the impact of the case management department, Identify and implement strategies to optimize case management’s impact on the revenue and reimbursement cycles, Develop a strategy to prepare for future mandatory bundled payments and many more.

Bundled Payments and Case Management in Hospitals

Earlier, healthcare providers were reimbursed by insurance companies and governmental agencies for different procedures used in the service provided. This was under fee-for-service healthcare system. Many agree that fee ...
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