Changing Environment


Bundled payment for post-operative physical therapy services.

Rob Worth, PT, DPT, OCS, ATC/L, MTC

“The times, they are a changin’.” These iconic words sung by Bob Dylan ring true today in many aspects of physical therapy private practice and health care payment. I believe that the changes in health care and health care payment may actually be good for high-quality physical therapy providers who are able to adapt to the new environment. For physical therapists to be leaders in providing cost-effective, expert musculoskeletal care in an evolving health care system, we must dedicate ourselves to innovation and collaboration. This will require us to contribute to managing the total cost of care for patients, their conditions, and their overall health care management. The days when we were paid for treatment units rather than for producing outcomes are numbered. This shift from volume-based payment to value-based payment has already started to occur and will benefit the physical therapy practices that are dedicated to providing the highest quality of care at a reasonable cost. One component of value-based payment is the bundled care model.

So what is bundled payment? Bundled payment allows a payer to issue a set amount of payment for a defined condition that includes the multiple services and providers involved in the care of that condition.

Why bundle payments?

The market is ready
  • Employers and individuals are responsible for more expense and want a defined cost = Demand
  • Providers are capable of more predictable outcomes and can define the service in an episode of care = Supply
Bundles are more efficient
  • Less non-value-added paperwork
  • Less required administration
Bundled payment could potentially be applied to almost any condition, though in the early pilot stages of bundled payment, it makes sense to start with just a few key diagnoses that have relatively good predictability in regards to cost and outcomes. This relative predictability will minimize risk in applying the bundled payment model. In the case of our practice, we started piloting a bundled payment model in 2010 in collaboration with a private practice group of orthopedic surgeons. The bundled payment model pilot was developed with one large insurance company for a single diagnosis (total knee arthroplasties). For the initial phase, it was decided to apply this bundled model to total knee arthroplasties (TKAs) due to:  
  • TKAs are a frequent orthopedic procedure and the frequency is climbing as baby boomers are growing older and wanting to stay active. TKAs performed in the U.S. increased by 161 percent in the past two decades.1
  • Homogeneous patient population relative to pre-operative diagnosis
  • Relative consistency in surgical componentry and level of post-operative care required
  • Large expense for the United States’ health care system, considering the volume performed and the total cost of the procedure and related care (national average is $43,783)2
What was included in the bundled payment for these patients receiving a TKA?
  • Surgeon and assistants
  • Anesthesiologist
  • Surgical facility fees
  • Recovery and skilled nursing
  • Post-operative physical therapist care
This was phase one. During this phase, data was collected and processes were improved that have allowed this bundled payment model to begin being utilized with other insurance companies. Phase two is now in the process of being implemented in our practice, which includes working with insurers and also direct contracting with employers, to set up contracts for bundled payment for many of the common post-operative conditions that we see in physical therapy practices, such as anterior cruciate ligament reconstructions, rotator cuff repairs, and more.

Advantages to the bundled payment model

Advantages for patients
  • Less cost out of their pocket (e.g., a single copayment for the entire course of outpatient physical therapist care)
  • 90-day “all-inclusive” package
Advantages for insurance companies
  • Pre-negotiated cost, therefore providing greater predictability in managing payments to providers and overall costs
  • Focus on outcomes rather than incentivizing providers for the amount of procedures and tests, as is present in the fee-for-service model of payment
  • Greater marketing opportunity for consumers (patients and employers)
Advantages for providers
  • Set payment at a fair price
  • Lower administrative costs for submitting and following up on claims for payment
  • Autonomy for the physical therapist in providing optimal management of the patient’s care (such as frequency and duration of post-operative physical therapy) with built-in outcomes

Key components of establishing a successful bundled payment program are having willing physician and insurance company collaborators that you trust and with whom you have a good working relationship, using treatment and outcomes data to develop and improve the program, and always being patient-focused.

Bundled payment has the potential for fewer administrative costs and more efficiencies, is outcomes-focused, gives tremendous autonomy to the physical therapy provider in determining optimal treatment, and ultimately has the potential to contribute to overall reduced health care costs in the United States.

Rob Worth, PT, DPT, OCS, ATC/L, is a PPS Member and the president/co-owner of Advanced Physical Therapy & Sports Medicine in Appleton, Wisconsin. He can be reached at


1. Cram P., MD; Lu X., MS; Kates S. MD, et al. Total Knee Arthroplasty Volume Utilization, and Outcomes Among Medical Beneficiaries. JAMA The Journal of the American Medical Association. Website: Posted September 2012. Accessed March 2014.

2. Agency for Healthcare and Research Equality. Website: Accessed March 2014.

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