The healthcare industry is in the midst of a revolutionary upheaval reflecting the concerns of patients, payers, providers, and policymakers over spiraling costs, lagging quality, and a lack of transparency. Bundled pricing — the provision of a flat rate for an entire episode of care — is an approach to pricing and care delivery that is gaining momentum as a solution to the current system’s many problems. For patients, the promise of bundled pricing is increased certainty regarding the cost of treatment and more transparency in the services provided. For payers, the lure is a shift in risk associated with cost variability and excess utilization by the provider. For providers, the attraction rests in the potential of bundled pricing to generate significant profits through efficiency in operations. But like most medical interventions, it’s not without its risks.

In the short-term, provider organizations that are prepared to offer bundled pricing now will reap financial benefits by virtue of being a first mover. Over the long-term, however, more providers will develop bundled pricing, those prices will drive toward equivalence, and commoditization becomes an increasing threat. At that point, it’s essential that providers be able to differentiate themselves from others in the market. Those providers able to demonstrate economic and clinical value (ECV) will gain a competitive advantage and reap the financial benefits that this entails. Commoditization is a potential side-effect of bundled pricing — and ECV is the antidote.

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