The Centers for Medicare and Medicaid Services (CMS) announced on August 23 its Bundled Payments for Care Improvement initiative, under which Medicare payments will be made for episodes of care through payment models promoting improved coordination, quality, and treatment outcomes. The initiative is authorized under section 3021 of the Affordable Care Act (ACA). CMS is seeking applications from provider organizations to test different episode definitions (acute care hospital stays, acute care hospital stays plus post-acute care, and post-acute care alone) and payment models over a three year period. Applicants will select the medical conditions (coronary bypass surgery, hip replacements, etc.) for which they will be seeking payments based on episodes of care and define the services that will be within the payment bundles. Most participating providers will be paid on an interim basis under a traditional fee-for-service method but such payments will be reconciled to a global, discounted target price applicable to an entire episode of care. Providers can retain the target amount if they meet quality assurance and reporting requirements. Research has shown that such an approach can improve patient care and control costs. First round applications are due October 21, 2011.