Which payment reform approach does the PPACA use to reduce costs and improve quality by paying providers a single price for an episode of care?

• A. Fee-for-service
• B. Capitation
• C. Bundled payments
• D. Retrospective payments

Answer: (C)

Bundled payments involve a single negotiated price that covers all the care components for an entire episode, such as preoperative care, the surgery, postoperative care, and follow-up, often across multiple providers and within a defined time frame. The PPACA used this approach to curb costs and lift quality by encouraging care coordination and reducing unnecessary services. With one price for the whole episode, providers are incentivized to work together to minimize complications, avoid duplicative testing, and prevent readmissions, since keeping costs under the bundled amount can yield shared savings and better outcomes. This contrasts with paying for each service separately (fee-for-service), which can drive higher volumes; fixed per-patient payments regardless of services (capitation), which shifts financial risk to providers; and payments determined after care (retrospective payments), which don’t specifically promote episode-wide efficiency. Bundled payments align incentives toward value and coordinated care across the entire episode.