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

Local initiatives are showing how new methods for paying for health care can improve quality and control costs. One strategy, called bundled payment, assigns a fixed payment to cover a set of services, such as a surgery or a patient’s diabetes care, over a defined time period. Bundled payments encourage providers to manage costs, while meeting standards of high-quality care.

Though the strategy sounds simple, implementing a different way to pay for care across health systems and communities is a complex undertaking. This brief from Aligning Forces for Quality (AF4Q), the Robert Wood Johnson Foundation’s signature effort to lift the overall quality of health care in targeted communities, examines challenges and shares lessons learned from two AF4Q communities in South Central Pennsylvania and Wisconsin.

This paper offers four steps that organizations considering a bundled payment pilot should follow: 

1. Define the focus, such as the types of procedures and conditions, and the number of practices involved;

2. Analyze the data, including utilization and cost trends in the region to decide the right approach;

3. Negotiate the deal when determining the prices; and

4. Figure out the small stuff, such as stop-loss levels and communications plans.

As the Wisconsin and South Central Pennsylvania experiments demonstrate, payment reform can’t be achieved on a ‘plug-and-play’ basis. It takes time, effort, and commitment on the local level, and potential pitfalls abound.”

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Aligning Forces for Quality

Aligning Forces for Quality (AF4Q) is the Robert Wood Johnson Foundation’s signature effort to lift the overall quality of health care in targeted communities, reduce racial and ethnic disparities and provide models for national reform.

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Bundled Payment

Testing PROMETHEUS Payment

The Health Care Incentives Improvement Institute furthered the development and pilot testing of its Prometheus bundled payment model. Researchers at RAND and the Harvard School of Public Health evaluated the initiative at three pilot sites.

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Payment Reform

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