What is the 'episode-of-care payment' concept for non-orthopedic conditions?

• A. The model pays a separate fee for each service.
• B. The model pays a single bundled amount covering all services across the care continuum for the defined episode.
• C. Payment is based on length of stay only.
• D. Payment is determined after year-end through performance bonuses.

Answer: (B)

An episode-of-care payment bundles all services for a defined clinical episode into one payment that covers the entire care continuum. For non-orthopedic conditions, this means the single bundled amount is intended to pay for everything from diagnosis and treatment through hospital care, post-acute services, medications, and care coordination within that episode, rather than paying separately for each service.

This approach is the best fit because it aligns financial incentives with coordinating care and achieving value, rather than simply increasing service volume. Providers are encouraged to manage resources efficiently, avoid unnecessary tests or procedures, and focus on outcomes within the episode’s budget.

Paying a separate fee for each service reflects traditional fee-for-service, which tends to reward more billable items rather than overall value. Tying payment to length of stay concentrates on hospitalization duration rather than the full care journey, potentially neglecting post-acute needs. Waiting until year-end to determine payment through performance bonuses introduces retrospective adjustments instead of a defined bundled price upfront, which is not the essence of episode-based payment.