Questions to Ask About Your Hospital’s Bundled Payment Strategy

In the United States, we have over 60,000 different diagnoses, more than 6,000 drugs, and more than 4,000 surgical techniques and procedures that we are attempting to deploy – regardless of the recipient’s ability to pay. In any given city, providers typically receive payments from as many as 60 or more payers, all paying completely different. And for patients with a chronic condition, the current system is so administratively burdensome that patients report feeling overwhelmed simply with the number of bills they receive each month.[1] Fee-for-service isn’t just expensive and unreliable, it is exhausting—for patients, physicians, and nurses.

With a bundled payment, however, one single payment is made for all of the care and services related to a specific clinical episode or condition. While bundled payments as a viable alternative to fee-for-service has been under investigation for more than 30 years, most studies in this reimbursement model have been in the areas of cardiac and orthopedic elective procedures due to their high overall total cost of care.[2] Largely influenced by the Affordable Care Act, over the last five years we have seen both private payers broaden their interest beyond elective procedures to include oncology care, post-acute care, and chronic disease bundles.[3] There has also been an increase in the number of studies in chronic diseases such as diabetes, asthma, and congestive heart failure, as well as oncology, maternity, and pediatrics.[4]

The role of bundled payments is only expected to grow. For board members and other senior hospital executives, it is important to understand what a smart bundled payment strategy looks like. This often means simply asking better questions. But, with a topic so broad and evolving, how do you know which questions are the right questions? Here are a few to help you get started:

  • Do we have a bundled payment strategy?
  • What evidence do we have that it is working? Is care delivery improving? Are costs going down? Are we making money?
  • Are physicians leading the effort and engaged in the work?
  • Do we have the technology to scale our efforts with employers and commercial payers?
  • Are we getting better at managing total cost of care, and if so, how do we know that?
  • What percent of our reimbursement portfolio should be comprised of new payment models?
  • Are our patients engaged?


This post was originally published in a special section for the Governance Institute, under the title, “The 21st-Century Patient Is More Complicated but the Remedies Don’t Have to Be: How Bundles and Other Innovations in Healthcare Payment Are Offering New Promise for Care Delivery,” by Deirdre M. Baggot, Ph.D., M.B.A., RN.

[1] Margarida Azevedo, “Pilot Program to Help CF Families Navigate Care Systems Reports Initial Success,” Cystic Fibrosis News Today, April 29, 2016.

[2] Deirdre Baggot and Cleo Burtley, “Bundled Payments: How Seemingly Small Innovations in Care Delivery Can Lead to Big Financial Rewards,” BoardRoom Press, The Governance Institute, April 2013; Peter S. Hussey et al., Bundled Payment: Effects on Health Care Spending and Quality: Closing the Quality Gap: Revisiting the State of the Science, Evidence Reports/Technology Assessments, No. 208, Agency for Healthcare Research and Quality, August 2012.

[3] CMS, APMs Overview, 2017.

[4] Laura A. Dummit et al., “Association between Hospital Participation in a Medicare Bundled Payment Initiative and Payments and Quality Outcomes for Lower Extremity Joint Replacement Episodes,” JAMA, September 27, 2016; CMS, “Notice of Proposed Rulemaking for Bundled Payment Models for High-Quality, Coordinated Cardiac and Hip Fracture Care,” 2016 (available at; CMS, “Episode Payment Models: General Information,” 2017 (available at; CMS, APMs Overview, 2017.

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