Document Type

Issue Brief

Publication Date



Fee-for-service Medicare, in which a separate payment is made for each service, rewards health care providers for delivering more services, but not necessarily coordinating those services over time or across settings. To help address these concerns, the Patient Protection and Affordable Care Act of 2010 requires Medicare to experiment with making a bundled payment for a hospitalization plus post-acute care, that is, the recuperative or rehabilitative care following a hospital discharge. This bundled payment approach is intended to promote more efficient care across the acute/post-acute episode because the entity that receives the payment has financial incentives to keep episode costs below the payment. Although the entity is expected to control costs through improved care coordination and efficiency, it could stint on care or avoid expensive patients instead. This issue brief focuses on the unique challenges posed by the inclusion of post-acute care services in a payment bundle and special considerations in implementing and evaluating the episode payment approach.


Issue brief no. 841

Open Access




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