Bundled payments are a recently developed, alternative method for funding healthcare services. When a patient has an episode of care, a ‘bundle’ is defined as the set of treatments or services provided to them. For example, if a patient has a stroke, the episode of care is all care provided to restore that patient to optimal health. Bundled payments are a funding method in which a single funding amount is used to fund the total amount of care related to a condition or medical event for a fixed time period. A bundle of care encompasses all aspects of a patient’s care across providers and settings, over a fixed period of time, including pre-acute, acute and post-acute care that spans healthcare settings and providers. If the cost to providers of treating a patient is more than the set funding amount, providers must cover the difference, and if the cost of treating a patient is less than the set amount, providers keep the extra. This arrangement gives providers the incentive to deliver efficient, effective and high quality care, to avoid costly readmissions and re-hospitalizations.
The goal of bundled payments are to increase the coordination of care across the continuum of providers and settings, reducing fragmented and siloed care, which lowers the quality of care delivered to patients (Spehar et al., 2005). The organizational structure created by bundled payments links providers in a way where each one is held accountable by their peers for the cost of care they provide to patients during an episode of care.
Bundled payments are not a funding method that is currently suitable for all conditions. Bundled payments are best suited for conditions or procedures which have clear clinical pathways. Bundled payments are less suitable for complex cases that have a variety of possible clinical pathways (and costs) as well as procedures with low volumes, or few providers of care (Struijs & Baan, 2011). As with many funding policies, accurate, timely and linkable data must be available across all healthcare settings to properly establish a proper bundled payment amount.
Bundled payments are a move away from a more typical fee-for-service funding mechanism for each healthcare setting. Bundled payments promote a more integrated model of healthcare funding, and are a promising strategy to improve coordination between providers and settings of care by aligning financial incentives, resulting in improved quality of care and access to services (Spehar et al., 2005; Mor, Intrator, Feng, & Grabowski, 2010). This funding mechanism is being piloted primarily in the US and the Netherlands. The Netherlands uses a nation-wide bundled payment program that covers diabetes care, chronic obstructive pulmonary disease care and vascular risk management (de Bakker et al., 2012). Examples of bundled payment models in the US include:
- Medicare Acute Care Episode (ACE) demonstration which includes orthopaedic and cardiovascular procedures;
- ProvenCare model under the Geisinger Health System which includes coronary artery bypass graft (CABG), hip replacement, cataract surgery, PCI, angioplasty, perinatal care, bariatrics, low back pain and erythropoietin management (Geisinger Health System, 2013);
- PROMETHEUS payment model covering conditions such as diabetes, hypertension, asthma, and surgical procedures such as hip and knee replacements (Hussey, Ridgely, & Rosenthal, 2011)