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Bundled Payments

In a bundled payment methodology, a single, "bundled" payment covers services delivered by two or more providers during a single episode of care or over a specific period of time. For example, if a patient has cardiac bypass surgery, rather than making one payment to the hospital, a second payment to the surgeon and a third payment to the anesthesiologist, the payer would combine these payments for the specific episode of care (i.e., cardiac bypass surgery).

Many physicians already have experience with "bundled payments" governing an episode of physician services. Common examples include "global surgery periods" and global payments for obstetrical care. The "bundles" that are now being contemplated simply include a broader array of services. However, by including services provided by physicians and health care facilities, the issues for physicians increase exponentially.

Chapter six: Bundled payments

In some cases, one entity (for instance, an accountable care organization) may receive the bundled payment and subsequently apportion the payment among participating physicians and providers. In other cases, the payer may pay the participating physicians and providers independently, but adjust each payment according to negotiated, pre-defined rules in order to ensure that the total payments to all of the providers for all of the defined services do not exceed the total bundled payment amount. This latter type of payment methodology is frequently referred to as "virtual" bundling.

Bundled payment arrangements are a type of risk-contracting. If the cost of services is less than the bundled payment, participating physicians and other health care providers retain the difference. But if the costs exceed the bundled payment, physicians and other providers are not compensated for the difference.

A physician should clearly understand the bundled payment methodology’s use of cost and quality benchmarks, risk adjustment and other mechanisms that are common to all risk arrangements. However, bundled payment arrangements raise key issues that may not arise in other risk-contracting contexts. Such issues include, but are not limited to:

  • whether or not the payer will pay a single entity or use virtual bundling; 
  • if payment will be made to a single entity, when the physician can expect to receive payment from that entity; 
  • how each episode of care is defined, including but not limited to, each item or service included in the bundle, identified by CPT, HCPCS, ASA, and ICD-9-CM codes, and any applicable modifiers; 
  • the duration of the bundle;
  • how the basic bundled payment is calculated;
  • whether the physician will be given information sufficient to enable the physician to calculate independently bundled payment amounts and determine whether or not those amounts are appropriate given the enrollees the physician is responsible for treating;
  • how risk adjustment factors will be calculated and applied;
  • how the payment will be apportioned between the participating providers;
  • the percentage that the payment amount received by the physician represents of the entire bundled payment made all bundled payment participants; and
  • the identities of each physician or provider that is involved in the bundling arrangement.
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