www.elsevier.com/locate/sart Available online at www.sciencedirect.com Bundled payment care initiative: How this all started John P. Andrawis, MD, MBA a , Karl M. Koenig, MD, MS b , and Kevin J. Bozic, MD, MBA c,n a Department of Orthopedic Surgery, Harbor-UCLA Medical Center, Torrance, CA b Department of Surgery and Perioperative Care, Dell Medical School at the University of Texas at Austin, Austin, TX c Department of Surgery and Perioperative Care, Dell Medical School at the University of Texas at Austin, 1400 Barbara Jordan Blvd, Suite 1.114, Austin, TX 78723 article info Keywords: Bundled payments Orthopedics Reimbursement abstract For the past 40 years health care policymakers have attempted to come up with creative ways to deal with uncontrolled medical inflation. Medicare has enacted multiple changes to their reimbursement system and experimented with different payment models. Bundled payments were first implemented for hospital in 1984. Since then experimental models that bundled both hospital and physician payments have been attempted with moderate success. With the passage of the Affordable Care Act, CMS was required to pilot a bundled payment model. As a result the Bundled Payments for Care Improvement Initiative was announced and piloted at multiple hospitals around the country. & 2016 Elsevier Inc. All rights reserved. 1. 1980s: The First Bundled payments- Hospitals In the late 1970s, health care policymakers were forced to deal with uncontrolled rising medical inflation and a deep economic recession [1]. To keep Medicare solvent, Congress and the Reagan administration turned to an alternative reimbursement system that academicians at Yale had studied and tested with reported success in New Jersey [2]. The new system paid hospitals a prospectively predeter- mined case rate based on a patient’s diagnosis or procedure, called Diagnosis Related Groups (DRGs). New Jersey’s state- regulated hospital payment scheme served as evidence that prospective payment could be implemented without upheaval. This new payment system was applied to Medicare and became the Medicare Prospective Payment system. Unnoticed by the general public, this dramatic change was the first time the federal government shifted the risks associated with the cost of providing care onto hospitals [1]. The goal was to alter the incentives for hospitals to improve their efficiency and reduce the growth of health care expen- ditures [3]. In reaction to needed changes, the first hospital bundled payment system was signed into law with the passage of The Tax Equity and Fiscal Responsibility Act (TEFRA) on September 3, 1982. This law mandated the development of the Inpatient http://dx.doi.org/10.1053/j.sart.2016.10.008 1045-4527/& 2016 Elsevier Inc. All rights reserved. J.A.: Editor for orthobullets.com (unpaid). K.M.K.: None. K.J.B.: Research support from Agency for Healthcare Research and Quality (AHRQ), United States (U.S.) and California Public Employees 0 Retirement System (CalPERS); Consultant for Harvard Business School and Centers for Medicare and Medicaid Services; Governance/Leadership Role at American Joint Replacement Registry (AJRR) (Board of Directors). Funding source: None. n Corresponding author. E-mail address: kevin.bozic@austin.utexas.edu (K.J. Bozic). S EMINARS IN A RTHROPLASTY 27(2016) 188 – 192