Bundled Payments for Care Improvement (BPCI) Initiative: General Information

The Bundled Payments for Care Improvement (BPCI) initiative is comprised of four broadly defined models of care, which link payments for the multiple services beneficiaries receive during an episode of care. Under the initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. These models may lead to higher quality and more coordinated care at a lower cost to Medicare.

Select anywhere on the map below to view the interactive version BPCI All Models mapped


Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. Payment rewards the quantity of services offered by providers rather than the quality of care furnished. Research has shown that bundled payments can align incentives for providers – hospitals, post-acute care providers, physicians, and other practitioners – allowing them to work closely together across all specialties and settings.

The Bundled Payments for Care Improvement (BPCI) initiative was developed by the Center for Medicare and Medicaid Innovation (Innovation Center). The Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries. Over the course of the initiative, CMS will work with participating organizations to assess whether the models being tested result in improved patient care and lower costs to Medicare.


In Model 1, the episode of care is defined as the inpatient stay in the acute care hospital. Medicare pays the hospital a discounted amount based on the payment rates established under the Inpatient Prospective Payment System used in the original Medicare program. Medicare continues to pay physicians separately for their services under the Medicare Physician Fee Schedule. The first cohort of Awardees in Model 1 began in April 2013.

Models 2 and Model 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. In Model 2, the episode includes the inpatient stay in an acute care hospital plus the post-acute care and all related services up to 90 days after hospital discharge. In Model 3, the episode of care is triggered by an acute care hospital stay but begins at initiation of post-acute care services with a skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency. Under these retrospective payment models, Medicare continues to make fee-for-service (FFS) payments; the total expenditures for the episode is later reconciled against a bundled payment amount (the target price) determined by CMS. A payment or recoupment amount is then made by Medicare reflecting the aggregate expenditures compared to the target price.

In Model 4, CMS makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished by the hospital, physicians, and other practitioners during the episode of care, which lasts the entire inpatient stay. Physicians and other practitioners submit “no-pay” claims to Medicare and are paid by the hospital out of the bundled payment. The first cohorts of Awardees in Models 2, 3, and 4 began in October 2013.

Models 2, 3 and 4 – Two Phases of Implementation

The Bundled Payments for Care Improvement initiative includes two phases for Models 2, 3, and 4. Phase 1, also referred to as the “preparation” period, is the initial period of the initiative during which CMS and participants prepare for implementation and assumption of financial risk. Phase 1 participants transition to Phase 2, also referred to as the “risk-bearing” period, upon execution of an agreement with CMS.  In BPCI an Awardee is the entity that assumes financial liability for the episode spending. Episode Initiators are health care providers that trigger BPCI episodes of care; they do not bear risk directly (unless they also serve as an Awardee) but participate in the model through an agreement with a BPCI Awardee. BPCI Episode Initiators include acute care hospitals, skilled nursing facilities, physician group practices, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals that trigger an episode of care.

As of October 1, 2015, the BPCI initiative has 1618 participants in Phase 2 comprised of 341 Awardees and 1277 Episode Initiators. The breakdown of participants by provider type is as follows: acute care hospitals (415), skilled nursing facilities (723), physician group practices (305), home health agencies (103), inpatient rehabilitation facilities (9), and long-term care hospitals (1). Some Awardees are not initiating episodes in BPCI and therefore are not included in the breakdown of participants by provider type.

Episodes of Care

Model 1 Awardees participate in all MS-DRGs. For Models 2, 3 and 4, there are 48 clinical episodes that participants are able to choose from. Click "Read More" below to see the DRGs that are included in each episode.

Click "Read More" below to see the DRGs that are included in each episode. There are 48 episodes that participants were able to choose from. See details on the health care facilities and the episodes they will be testing.


Acute myocardial infarction
Automatic implantable cardiac defibrillator generator or lead
Back and neck except spinal fusion
Cardiac arrhythmia
Cardiac defibrillator
Cardiac valve
Cervical spinal fusion
Chest pain
Chronic obstructive pulmonary disease, bronchitis/asthmae
Combined anterior posterior spinal fusion
Complex non-Cervical spinal fusion
Congestive heart failure
Coronary artery bypass graft surgery
Esophagitis, gastroenteritis and other digestive disorders
Double joint replacement of the lower extremity
Fractures femur and hip/pelvis
Gastrointestinal hemorrhage
Gastrointestinal obstruction
Hip and femur procedures except major joint
Lower extremity and humerus procedure except hip, foot, femur
Major bowel
Major cardiovascular procedure
Major joint replacement of the lower extremity
Major joint replacement of upper extremity
Medical non-infectious orthopedic
Medical peripheral vascular disorders
Nutritional and metabolic disorders
Other knee procedures
Other respiratory
Other vascular surgery
Pacemaker Device replacement or revision
Percutaneous coronary intervention
Red blood cell disorders
Removal of orthopedic devices
Renal failure
Revision of the hip or knee
Simple pneumonia and respiratory infections
Spinal fusion (non-Cervical)
Syncope and collapse
Transient ischemia
Urinary tract infection


Additional Information