Bundled Payment: The Quest for Simplicity in Pricing and Tying Payment to Quality

While fee-for-service remains the dominant approach to paying for health care in the United States, multiple local and regional initiatives have sought to demonstrate that other payment schemes can do better—that they can achieve higher quality and better overall outcomes, greater efficiency, and lower or at least controlled costs. Bundled payment (BP) is one such alternative. Bundled payment is the concept of paying a fixed dollar amount to cover a set of services, as an episode of care over a defined period. Because of the fixed price, providers are encouraged to hold variable costs down; yet BP programs usually require providers to satisfy a minimum set of quality metrics in order to receive payment, thus ensuring providers do not skimp on care. This paper examines issues confronted by two AF4Q communities that are considering or implementing BP initiatives.