Bundled payments, also known as episode-based payments, are a healthcare reimbursement model in which a single payment covers all services related to a defined clinical episode of care. Rather than paying each provider separately for individual services, the payer issues one payment that encompasses pre-procedure workup, the procedure itself, post-acute care, and follow-up visits within a specified time window, typically 30 to 90 days.
The Centers for Medicare & Medicaid Services (CMS) has been a leading proponent of bundled payments through programs such as the Bundled Payments for Care Improvement (BPCI) initiative and its successor, BPCI Advanced. These programs set target prices for common clinical episodes such as hip and knee replacements, cardiac procedures, and spinal surgeries. Participating providers who deliver care below the target price share in the savings, while those exceeding the target may owe repayment to CMS.
Bundled payment programs require tight coordination among surgeons, hospitals, rehabilitation facilities, and home health agencies. Success depends on standardizing clinical pathways, reducing post-acute care variation, and preventing complications that drive up episode costs. Health systems that excel under bundled payments typically invest in patient navigators, pre-surgical optimization protocols, and preferred post-acute care networks. The model has shown promise in reducing total episode spending while maintaining or improving quality outcomes.