C-Suite Cheat Sheet: Bundled Payments

Executive Summary

Under a bundled payment model, a payer issues a lump sum, or a “bundled” payment, to providers involved in delivering an episode of care during a specific time period. This bundle may include physicians, hospitals, and post-acute care providers. Because a bundled payment is smaller than the sum of individual payments to providers, providers must reduce input costs and deliver a more efficient episode of care to succeed. The Centers for Medicare and Medicaid Services (CMS) has created a few bundled payment programs for Medicare beneficiaries, but providers can also commercial payers or employers in similar bundled payment programs.

In April 2013, Medicare introduced the Bundled Payment for Care Improvement (BPCI) Initiative, an optional program that aimed to increase coordination among providers treating Medicare beneficiaries. This program set the stage for other similar programs like Medicare’s first mandatory bundled payment program, CJR (Comprehensive Care for Joint Replacement), introduced in 2016. However, in 2017, CMS retired BPCI and made CJR voluntary in some markets. In 2018, CMS replaced BPCI with an updated program called BPCI Advanced.

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