Bundled Payment

Key facts

Current Medicare model

Transforming Episode Accountability Model (TEAM), mandatory, 2026 to 2030

TEAM episodes

Joint replacement, hip and femur fracture, spinal fusion, CABG, major bowel surgery

Earlier Medicare models

BPCI Advanced (ended December 31, 2025) and CJR

Common designs

Retrospective reconciliation to a target price, or one prospective payment

What is a bundled payment?

A bundled payment defines an episode of care, sets a price or target for everything in it, and holds one or more providers accountable for the total. Episodes usually begin with a trigger, such as a hospital admission in a specific diagnosis-related group or an outpatient procedure, and extend for a fixed window afterward.

Bundling sits between fee-for-service and capitation. The provider takes risk for how efficiently each episode is managed, including readmissions and post-acute care, but not for how many episodes occur.

How bundled payments work

Bundles differ in how money moves and how long the episode lasts:

• Retrospective bundles: providers bill fee-for-service as usual, and after the period the payer compares actual episode spending with a target price, paying a reconciliation amount or collecting a repayment. BPCI Advanced and TEAM use this design.
• Prospective bundles: the payer makes one payment up front for the whole episode, and the receiving organization pays the other providers involved. Some commercial and employer direct contracts use this design.
• Episode windows: TEAM holds hospitals accountable from the surgery through 30 days after discharge or the outpatient procedure; BPCI Advanced used 90-day episodes.
• Quality adjustment: reconciliation amounts are typically adjusted based on quality measure performance.

Why bundled payments matter

Post-acute care is often a large source of spending variation in surgical episodes, so bundles push hospitals to use home health or outpatient rehabilitation instead of skilled nursing facilities when clinically appropriate, and to narrow preferred post-acute networks. That shifts referral volumes for skilled nursing facilities, home health agencies and device suppliers.

Because TEAM is mandatory for selected acute care hospitals in selected Core-Based Statistical Areas, CMS rather than the hospital decides participation. The participant list identifies hospitals under direct financial pressure to manage surgical episode costs, including implant and drug spending.