On August 23, 2011, the Centers for Medicare & Medicaid Services(CMS) announced a new initiative to help improve care for patients in the hospital and after discharge. Doctors, hospitals, and other health care providers can now apply to participate in a new program known as the Bundled Payments for Care Improvement initiative("Bundled Payments Initiative"). Authorized by the Affordable Care Act of 2010, the Bundled Payments Initiative will align payments for services delivered across an episode of care, such as heart bypass or hip replacement, rather than paying for services separately. By aligning the payments, Medicare hopes to give doctors and hospitals new incentives to coordinate and improve the quality of care and save money for Medicare and the patients.

The Bundled Payments Initiative will bundle the payments for the package of services patients receive during a specific episode ofcare. By bundling payments across providers for multiple services,CMS expects providers will have a greater incentive to coordinate and ensure continuity of care across settings, resulting in better carefor patients. Better coordinated care can reduce unnecessary duplication of services and reduce preventable medical errors.

The Bundled Payments Initiative is being launched by the new Center for Medicare and Medicaid Innovation (the "Innovation Center"), which was created by the Affordable Care Act to find new and better ways to provide and pay for health care to the growing population of Medicare and Medicaid beneficiaries.