What are Bundled Payments?

Video Narration


Narration of professional \"explainer video\" animation, for The Advisory Board Company.

Official video description: Any time you read about hospital finance or changing reimbursement models, the term \"bundled payment\" will come up without fail. Right now, nearly 500 hospitals have signed up to test bundled payments with Medicare, commercial payers, and large employers. But what does that actually mean?

In this video, we explain what bundled payments are, how they differ from fee-for-service, and what the potential benefits and pitfalls are when working under this model.

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Vocal Characteristics



Voice Age

Middle Aged (35-54)


North American (General) North American (US General American - GenAM)


Note: Transcripts are generated using speech recognition software and may contain errors.
across the country, health care providers are experimenting with new models to try and make health care more affordable. One of the more promising of those models is called Bundled Payment, and right now, nearly 500 hospitals have signed up to test bundled payments with Medicare, commercial payers and large employers. Sounds great, but what exactly is a bundled payment? Well, a bundled payment is basically a single fixed payment amount designed to pay all the providers involved in an episode of care. So say Grandma needs a hip replacement. That single lump sum would cover the costs for the hospital physician, physical therapy, possibly readmissions and so on. That's a big leap from how healthcare's paid for today. Under the system we have now, will we call fee for service? Each provider who treats a patient across that episode is paid separately. All those individual payments reinforce individual effort, but nobody is responsible for coordinating care. And Grandma ends a bombarded with bills now in a bundled payment model that combined lump sum of lines. The incentives for all the providers. Since there's just one fixed payment amount, physicians have a stake in hospital costs and vice versa. And if everyone works together to improve quality and efficiency, they get a share in the savings, the fixed bundle minus the actual costs. Patients benefit from that bundling too early, bundling pilots air, showing some promising quality improvement. A better coordinated experience, not to mention simplified billing and bundled payments, can also help bring down costs for insurers and employers. Since that fixed bundle amount is less than the total of all those individual payments. And since providers can't build extra for additional costs, remember, it's a fixed rate. Bundling makes prices a lot more transparent and predictable. Right now, most of these programs are voluntary, but still why isn't everyone running to adopt bundled payments? Well, frankly, because there are some risks involved. Basically, everyone's betting they'll be able to deliver the same cares before, but for a lower cost. They're also taking the chance they'll be able to get all the right people to work together. So grandma, surgeon, primary care, physician, physical therapist, even the pharmacy they're assuming they'll be able to set the pricing of those bundles correctly has set them too low, and they could be losing a lot of money every time they treat someone and that they'll be able to coordinate the whole thing, collecting and distributing payments, coordinating care and finding waster dis costs. All that said, a lot of providers have decided the benefits of bundling for patients, purchasers and clinical partners really do outweigh the risks. So could bundling be in your future? The Adviser board can help you find out. Toe learn mawr. Check out our collection of best practice research tools and expert insight at adviser dot com slash bundle.