Which statement best distinguishes episode-based payment from per diem in hospital billing?

• A. Per diem pays a daily rate for inpatient stay, not tied to episode outcomes.
• B. Episode-based pays a bundled sum for all care in an episode.
• C. Episode-based is only for outpatient services.
• D. Per diem is a bundled payment for the entire hospitalization.

Answer: (B)

Episode-based payment is a single fixed amount that covers all care within an entire episode of treatment—from admission through discharge, and often including post-acute care. This bundled approach incentivizes coordinating services to keep total costs down while preserving quality, since one payment covers everything in that episode regardless of how many services are used. Per diem, on the other hand, pays a fixed amount for each inpatient day, so total reimbursement grows with the length of stay and is not tied to the overall episode outcome. That fundamental difference is what sets episode-based apart: a bundled sum for all care in an episode. The other statements don’t capture that contrast—one describes per diem, another wrongly limits episode-based to outpatient care, and another misstates per diem as a bundled hospitalization payment.