What is a bundled payment model and provide a typical example?

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Bundled payment models reimburse a single price for all services in an episode of care, aiming to promote coordination among providers and control total costs while maintaining quality. In a typical example, a joint replacement episode would include a single bundled payment covering the entire pathway from preoperative assessment through surgery, implants, hospitalization, and all post-acute care such as rehabilitation or home health for a defined period (for instance 30, 60, or 90 days). Providers work together to manage care within that price, sharing savings if costs are below target and quality is maintained, or bearing risk if costs exceed the target. This approach contrasts with paying separately for each service (fee-for-service), using a fixed annual hospital budget (global or capitation-style budgeting), or restricting the bundle to inpatient care and omitting post-acute services, which undermines the coordination and cost-control goals.