OBJECTIVES: By creating incentives around quality and efficiency, there exists consideration to bundle hospital and physician payments around the episodes of inpatient surgery. We provided current payments around surgical episodes including the degree to which different types of providers are involved. In particular, we looked at the most expensive procedure performed commonly on the elderly: coronary artery bypass graft (CABG) surgery. METHODS: The study was based on complete national U.S. claims data. Managed care patients were excluded (16% in 2005) from the study because service provided to them was not consistently captured in the data set. We also excluded patients who were less than 65 years of age or over 99, and those not enrolled in the data set at the time of their procedures (4%). Also excluded were patients who were nursing home residents before surgery. Patients undergoing CABG were identified using ICD-9 codes. Price-standardized payments from the date of admission for the index procedure to 30 days post-discharge were determined and categorized by payment type (hospital, physician, and post-acute care) and sub-type. RESULTS: The average total payment around an inpatient surgery episode was $45,358 for CABG. Hospital payments accounted for the largest of total payments (60% of the procedure), followed by physician payments (13%). Diagnosis-Related Group (DRG) payments and surgeon and anesthesia professional payments together accounted for 65% of total payments. Among payment types potentially leveraged by bundled payments, 30-day readmissions accounted for 10% of total payments around surgical episodes. Post-acute care, including home health care and extended care facilities, accounted for 7% of total payments. CONCLUSIONS: Payments for potentially mutable services, including outlier payments, 30-day readmissions, and post-acute care are considerable and might be reduced by incentives for hospitals and physicians to improve quality and efficiency.