Five TIPS for Preparing for Bundled Payments

Updated on July 8, 2013
Cathy DiNardo
Cathy DiNardo
Kristi Powers
Kristi Powers

By Kristi Powers and Cathy DiNardo

With greater pressure and reliance on hospitals to provide efficient high-quality care, many have begun adopting bundled payment strategies – some with one of the four CMS Bundled Payment Care Initiative (BPCI) models, and some with ‘homegrown’ arrangements with private payors and employers. Hospitals implementing these strategies anticipate cost-of-care reductions, improved quality, enhanced care coordination, and strengthened physician alliances.

When considering participation in a bundled payment strategy, we recommend the following:

Explore Potential Care Options and Choose Episode(s) of Care – Begin by identifying and exploring services that could be easily bundled, have a strong likelihood of physician participation and interest, and/or that provide the best financial return. For example, cardiovascular and orthopedics service lines are the most common chosen for bundling. Next, determine the scope of service along the care continuum to be included in the bundle. For instance, an orthopedic ‘episode of care’ might be defined as pre-operative diagnostics, acute care surgery, and follow-up physician office visit care. Meanwhile, a cardiovascular ‘episode’ might include the open heart surgery inpatient acute stay only.

Gain Physician Support and Convene Key Stakeholders for a Bundled Payment Steering Committee – Involving physicians at the beginning of the planning process will solidify their support, advocacy, and future participation in the program. All involved in the episode of care should be educated on the program and the process. A formal Bundled Payment Steering Committee comprised of key physician and hospital stakeholders will drive the preparations and coordinate all operational changes.

Confirm the Existence of Adequate Data Systems – Data is critical, especially accurate patient-level cost data. A robust cost accounting system will be essential in preparing for and operationalizing bundled payment programs. The system should have the capability to run detailed reports and perform analyses using information from all services within the episode of care continuum.

Know Your Numbers – To implement a successful bundled payment scenario, it is imperative to understand the cost of care within the bundle. Therefore, a series of detailed analyses must be performed, including: physician utilization (of all physicians involved), cost savings opportunities, and payment discount risk. Understanding elements like device and supply costs, consulting physician costs, ancillary utilization, quality outcomes, and lengths of stay will lead to determining how much of a discount can be afforded and how to ‘make-up for’ the decreased negotiated lump-sum payment.

Design the Payment and Operational Processes – Before any bundled payment arrangements are negotiated, the Steering Committee must establish how the payment will be shared among all providers and the related operational changes that will need to take place. Agreements should be developed between all expected providers of care, including the hospital, physicians, ancillary providers, etc. Additionally, processes to identify bundled payment patients within the system, appropriate documentation and billing, and the actual payment mechanism will need to be drafted.

We also recommend completing a bundled payment preparedness survey to assess an organization’s level of readiness. A preparedness survey is available on Corazon’s website at

Creating a sound infrastructure for bundled payments will best position hospitals for a future of declining reimbursement. It may not make sense for every organization to enter a bundled payment arrangement right now; however, performing the preparation steps listed above will prove beneficial in reducing costs and improving efficiency and quality overall…whether or not a bundled payment strategy is planned for the near-term.

Kristi Powers is a Consultant and Cathy DiNardo is Decision Support Specialist for Corazon. Corazon offers consulting, recruitment, interim management, and physician practice & alignment services to hospitals and practices in the heart, vascular, neuro, and orthopedics specialties.  Find Corazon on Facebook at or on LinkedIn at  To learn more, call 412-364-8200 or visit  

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