New study supports mandatory bundled payment models

A study published in the February 2026 edition of Health Affairs provides evidence that voluntary bundled payment models don’t work in the long term.

Researchers from Brown University and Brigham and Women's Hospital in Boston analyzed savings associated with the Bundled Payments for Care Improvement Advanced (BPCI-A) Model, an ongoing, voluntary alternative payment model run by the CMS Innovation Center. In BPCI-A, participating providers receive a single, retrospective payment for a 90-day clinical episode, sharing in savings if they reduce costs below a target price and meet quality thresholds.

The study linked the bundled payment model to cost savings for hospitals, specifically, which make up the majority of BPCI-A participants. On average, participating hospitals reduced their 90-day episode spending by $324, with the largest reductions occurring in the two most recent years.

Spending reductions were most significant for orthopedics and neurological care. Meanwhile, hospitals reduced spending the most on skilled nursing facility care, supporting growing evidence that most bundled payment savings stem from changes in institutional post-acute care utilization.

Despite hospital savings, CMS lost $171 million during the first four years of the model, the study found. The only year in which bonuses to participants did not offset savings to CMS was in model year 4, during which changes went into effect. Specifically, CMS updated BPCI-A during its fourth year to mitigate ongoing net losses by requiring hospitals to participate in episodes across an entire service line versus individual conditions and applying a retrospective adjustment to financial targets.

Bundled payment models may take time -- and some tweaking -- to generate overall savings. However, researchers suggested that their findings point to the business case for mandatory models, like CMS' latest initiative, the new Transforming Episode Accountability Model (TEAM).

Launched on Jan. 1, 2026, TEAM is a five-year, mandatory bundled payment model also run by the CMS Innovation Center. The model draws on lessons from BPCI-A and other Innovation Center models, holding hospitals in select areas accountable for cost and quality of care for five surgical procedures through 30 days post-discharge. Approximately 741 hospitals are participating across 188 selected markets.

CMS hopes the mandatory model will reduce Medicare spending while improving care quality and enhancing the patient experience. However, the federal agency has gone back and forth on whether to require providers to participate in these experiments.

Hospital groups, including the American Hospital Association (AHA), have opposed mandatory alternative payment models, including TEAM. The groups have instead asked CMS to make the models voluntary.

"Mandatory participation is inappropriate given that many of the selected organizations are neither of an adequate size nor in a financial position to support the investments necessary to transition to mandatory bundled payment models," AHA wrote in June 2025 regarding TEAM. "Requiring hospitals to take on large, diverse bundles would require more risk than many can manage, threatening their ability to maintain access to quality care in their communities."

Success in any alternative payment model requires heavy investment, from technical infrastructure upgrades and data cleanup projects to changes in clinical workflows and staffing. But the shift to accountable care through these models has been slow, with little progress made in the past year, according to a recent analysis from America's Health Insurance Plans.

Net savings are possible under voluntary bundled payment models, the study suggested. BPCI-A did yield savings to CMS in its fourth year after changes to the model's structure. But researchers pointed to a decline in hospital participation this year, BPCI-A's last performance year. They said savings in voluntary models "may have a short shelf life, as participants sustaining losses will exit."

"Our study provides evidence that voluntary bundled payment is unlikely to generate meaningful or sustained savings for CMS," they concluded. "CMS can likely increase savings by transitioning to mandatory bundled payment, as it has through the new Transforming Episode Accountability Model."

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.