Forum Session

Bundled Payment in Medicare: Promise, Peril, and Practice
April 20, 2012


Kathryn Linehan


Fee-for-service Medicare is blamed for a number of inefficiencies in the delivery of care including service duplication, the provision of unnecessary care, failure to coordinate services for the patient, and resulting excess spending and poor quality. Bundled payment models, which aim to pay for more comprehensive episodes that may encompass multiple provider types are one alternative to fee-for-service payment that has the potential to promote more efficient, coordinated care across providers or settings. Establishing a bundled payment system presents several critical design choices that must balance fairness to providers with promoting responsibility for an entire episode at a price that is adequate to ensure access. In addition, operational challenges facing payers and providers, even those who are highly motivated to participate in new payment models, must be addressed. Understanding the risks can help to design bundled payment programs with features that may mitigate some of those risks and establish realistic expectations for what bundling can achieve in the Medicare program.

The Center for Medicare & Medicaid Innovation (CMMI) in the Centers for Medicare & Medicaid Services (CMS) is currently in the process of implementing the Bundled Payments for Care Improvement (BPCI) initiative. Under this initiative, CMMI has received (and continues to receive) applications from eligible participants for four broadly defined bundled payment models that will combine payments for multiple services (depending on the model) during an episode of care. Among the  goals of the BPCI are fostering quality improvement while decreasing the cost of an episode of care, giving providers flexibility to redesign care to meet the needs of their community, and removing barriers and provide opportunity for partnerships among providers and other stakeholders.

This Forum session described the rationale for Medicare to move toward episode or bundled payment; examined the policy and operational challenges that a bundled payment approach presents for providers and payers, particularly Medicare, and ways those could be addressed; and provided the audience with an understanding of the CMMI's BPCI initiative.


Related Materials

Laura A. Dummit, "Medicare's Bundling Pilot: Including Post Acute Care Services" (Issue Brief No. 841, March 28, 2011).

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