Episode-Based Payments: Charting a Course for Health Care Payment Reform

Policy Analysis No. 1
January 2010
Hoangmai H. Pham, Paul B. Ginsburg, Timothy K. Lake, Myles Maxfield

As consensus grows that true reform of the U.S. health care system requires a move away from fee-for-service payments, designing alternative payment methods, including episode-based payments, has emerged as a high priority for policy makers. An episode-based payment approach would essentially bundle payment for some or all services delivered to a patient for an episode of care for a specific condition over a defined period. Ideally, a well-designed episode-based payment system would encourage providers to improve efficiency and quality of care. Careful consideration of how to design and implement episode-based payments, however, will set the stage for their success or failure. Key policy considerations include how to define episodes of care; establish episode-based payment rates; identify which providers should receive episode-based payments; ensure compatibility with other proposed payment reforms; and stage implementation to focus on a set of priority conditions, patients and providers.

This article is available at the National Institute for Health Care Reform Web site.