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Background: The purpose of this study is to determine whether episode Target Prices in the Bundled Payment for Care Improvement (BPCI) initiative sufficiently match the complexities and expenses expected for patients undergoing hip arthroplasty for femoral neck fracture (FNF) as compared to hip degenerative joint disease (DJD).Methods: Claims data under BPCI Model 2 were collected for patients undergoing hip arthroplasty at a single institution over a 2-year period. Payments from the index hospitalization to 90 days postoperatively were aggregated by Medicare Severity Diagnosis-Related Group (469 or 470), indication (DJD vs FNF), and categorized as index procedure, postacute services, and related hospital readmissions. Actual episode costs and Target Prices were compared in both the FNF and DJD cohorts undergoing hip arthroplasty to gauge the cost discrepancy in each group.Results: A total of 183 patients were analyzed (31 with FNFs, 152 with DJD). In total, the FNF cohort incurred a $415,950 loss under the current episode Target Prices, whereas the DJD cohort incurred a $172,448 gain. Episode Target Prices were significantly higher than actual episode prices for the DJD cohort ($32,573 vs $24,776, P < .001). However, Target Prices were significantly lower than actual episode prices for the FNF cohort ($32,672 vs $49,755, P = .021).Conclusion: Episode Target Prices in the current BPCI model fall dramatically short of the actual expenses incurred by FNF patients undergoing hip arthroplasty. Better risk-adjusting Target Prices for this fragile population should be considered to avoid disincentives and delays in care. [ABSTRACT FROM AUTHOR]