| Definition | Payment model where healthcare providers are reimbursed for each procedure or service provided. | Payment model where providers are reimbursed a lump sum for all services delivered during a specific episode of care. |
| Focus | Individual services and procedures. | Bundled services within a defined episode of care (e.g., surgery, recovery, rehabilitation). |
| Payment Structure | Payments are made separately for each service or procedure. | A single payment covers all services within an episode, regardless of the number of services provided. |
| Financial Incentives | Incentivizes volume of services provided, potentially leading to overutilization. | Incentivizes cost-efficiency and quality outcomes within the episode. Risk of underutilization exists. |
| Quality of Care Impact | Quality may be variable; focus is on quantity of services rather than outcomes. | Emphasizes quality outcomes and coordinated care across the episode. Risk of cutting corners on care to reduce costs. |
| Risk Distribution | Provider bears minimal risk; payment is guaranteed for each service rendered. | Provider assumes more financial risk; if costs exceed the bundled payment, the provider may incur losses. |
| Cost Control | Less effective in controlling costs; higher variability in total healthcare costs due to payment per service. | More effective in controlling costs; encourages efficient resource use to stay within the payment cap. |
| Complexity of Administration | Easier to administer due to straightforward, service-based billing. | More complex to administer, requiring detailed tracking of services within an episode and coordination among providers. |
| Patient Experience | Patients may experience fragmented care with multiple providers billing separately. | Patients often experience more coordinated care, with better communication among providers. |
| Reimbursement Rate Negotiation | Rates are negotiated for each individual service, potentially leading to varied rates for similar procedures. | A single rate is negotiated for the entire episode, simplifying the negotiation process. |
| Data Requirements | Requires detailed documentation of each service rendered for billing purposes. | Requires comprehensive tracking of all services provided during the episode, including outcomes data. |
| Prevalence in Healthcare Systems | Common in fee-for-service models, especially in the U.S. healthcare system. | Increasingly adopted in value-based care models, particularly in systems aiming to improve cost-efficiency and patient outcomes. |
| Examples of Use Cases | Surgical procedures, diagnostic tests, outpatient visits. | Joint replacement surgery, maternity care episodes, chronic disease management. |
| Regulatory Considerations | Subject to traditional fee-for-service regulations, with minimal oversight on outcomes. | Often subject to value-based care regulations, with a focus on outcome measures and cost efficiency. |
| Long-Term Sustainability | Potentially unsustainable due to rising healthcare costs and lack of focus on outcomes. | Considered more sustainable in the long term due to emphasis on cost control and improved patient outcomes. |
