BACKGROUND: Bundled payment programs broaden hospitals' responsibility for spending to entire episodes of care. After demonstration programs in cardiac surgery and joint replacement, these payment reforms could soon extend to major operations like colectomy under Medicare's Bundled Payments for Care Improvement-Advanced Program. OBJECTIVE: To evaluate how specific policies and surgical practice patterns would influence hospital reimbursement in a bundled payment program for colectomy. DESIGN: This was a population-based study. SETTINGS: We used national data from the 100% Medicare Provider Analysis and Review files for the years 2010 to 2014. PATIENTS: We identified patients undergoing colon resections using Diagnosis Related Group codes and International Classification of Disease, Ninth Revision, Clinical Modification codes. MAIN OUTCOME MEASURES: We simulated per case reconciliation payments as the difference between actual price-standardized 90-day episode payments and estimated regional spending benchmarks among fee-for-service Medicare beneficiaries undergoing colectomy (2010-2014).We projected per-patient and overall hospital-level reconciliation payments and the proportion of hospitals that would achieve shared shavings under bundled payment conditions. We also assessed how variation in the use of laparoscopy could influence shared savings, using instrumental variable methods to account for selection bias between laparoscopic and open procedures. RESULTS: Under simulated bundled payment conditions, 51.8% of hospitals would achieve shared savings, but the average case would incur a reconciliation penalty of −$234