What does the term "bundled payments" mean in healthcare operations?

Bundled payments refer to a payment model where a single comprehensive payment is made to cover multiple services associated with a single episode of care. This means that rather than billing for each individual service separately—such as consultations, tests, and procedures—providers receive one consolidated payment that encompasses all the costs associated with that specific care episode.

This model aims to encourage coordination among care providers, reduce unnecessary spending, and improve patient outcomes by incentivizing healthcare providers to collaborate and focus on delivering the most effective care within the bundled payment framework. The concept encourages efficiency and can potentially lower costs for both insurers and patients, as providers share the financial responsibility and are motivated to keep the costs within the bundled payment limit.