The IHA Bundled Episode Payment and Gainsharing Demonstration Project


Principal Investigator: Tom Williams, Dr.P.H.

Integrated Healthcare Association


This study evaluated whether bundled payments can be an effective model for commercial health plans, hospitals, and physician organizations in California.


In collaboration with various technical consultants, Integrated Healthcare Association (IHA) convened a group of stakeholders (health plans, provider organizations, and vendors) and managed a consensus-building process for developing the methods and means to implement bundled payments across clinical conditions and patient populations. This effort ultimately produced episode definitions and model contracts for 10 clinical conditions. The study focused exclusively on the implementation of bundled payments for total knee replacement (TKR) and total hip replacement (THR) procedures. RAND Corporation conducted an independent evaluation of a 3-year demonstration program of bundled payments for these procedures.


Despite high levels of enthusiasm and effort among stakeholders, the demonstration project did not achieve its goal of widespread implementation of bundled payments across multiple payers and hospital-physician partners. The evaluation documented numerous barriers to implementation, including concerns about risk and administrative burden, lack of automated systems to process bundled payments, and regulatory delays. Therefore, few contracts were signed and inadequate volume existed to test hypotheses about the program's impact on cost and quality. However, the demonstration did reveal the many decisions needed for successful implementation of bundled episode payments, and produced many technical solutions and lessons learned that have been documented in various tools and other deliverables, including white papers, episode definitions, and contract templates.

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Page last reviewed December 2017
Page originally created December 2014
Internet Citation: The IHA Bundled Episode Payment and Gainsharing Demonstration Project. Content last reviewed December 2017. Agency for Healthcare Research and Quality, Rockville, MD.