In the US, ‘pay-for-performance’ (P4P) programs have gained popularity among healthcare policymakers as well as private and public players, including Medicaid and Medicare. The term ‘pay-for-performance’ covers all the initiatives that contribute to the quality, efficacy, and overall value of healthcare. (1) These programs provide financial incentives or disincentives to providers or institutions as per their performance on quality measures. Ideally, the well-targeted and designed P4P programs would improve the behaviour of providers and healthcare systems by enhancing the quality of care delivery, reducing redundant use of expensive healthcare services, and improving patient health outcomes. (2,3)

Moreover, Affordable Care Act also makes a provision for the use of P4P programs, particularly in Medicaid, enabling identification of most effective designs and programs through experimentation. (1) The P4P programs are especially relevant in the US healthcare owing to wide gaps in healthcare quality and the long-standing fee-for-service (FFS) system that may incentivize for volume of services instead of quality. (4) Therefore, the P4P programs make for a great strategy to transition healthcare to value-based care. (5)

In spite of the attractive advantages of P4P programs, there is not enough evidence on P4P programs for improving patient outcomes. There is mixed evidence from a recent systematic review examining the efficacy of P4P programs in the United States, wherein modest improvements in process-of-care outcomes but little effect on patient outcomes were reported. (6) However, the evidence today has grown substantially, and other countries, such as the United Kingdom, have even gained extensive experience with large P4P initiatives that may provide further relevant information. (3)

A typical P4P program offers a bonus to healthcare providers upon meeting or even exceeding the agreed-upon quality or performance measures, for e.g. reductions in HbA1c in diabetic patients. These programs may also incentivize improvement in performance over a certain duration, such as year-to-year decreases in the rate of avoidable hospital readmissions. They can also levy financial penalties on providers failing to achieve specified goals or cost savings. For instance, the Medicare program doesn’t pay hospitals anymore to treat patients who acquire certain avoidable conditions during their hospital stay, such as pressure sores or urinary tract infections associated with use of catheters. The quality measures applied in P4P programs are categorized into- processes, outcomes, patient experiences and structures. (1)

Other countries than the US and UK are also implementing P4P programs for enhanced care delivery. Such as, China’s first P4P insurance for oncology patients that would cover around 34 cities has been implemented by Pfizer Inc. Pfizer recently launched a P4P insurance program for its breast cancer drug Ibrance palbociclib in China. Pfizer has collaborated with insurance company Shanghai Branch of PICC Health Insurance Co. Ltd. (Beijing, China) together with the medical payment services company Shanghai MediTrust Health Co. Ltd. (Shanghai, China) to develop the Bo’ai Xin’an – Patient Benefit Management Program- in order to reimburse enrolled patients up to 33.5% of their Ibrance treatment cost if they experience disease progression or metastasis within the first 126 days after initiating the treatment with Ibrance together with an aromatase inhibitor. (7) Another examples of P4P programs in the US include some private sector programs, such as California Pay for Performance Program, Alternative Quality Contract; and also a few public sector programs, such as Value-Based Purchasing Program by the Centers for Medicare and Medicaid Services (CMS). (1) Pay for performance model has also been implemented to incentivize clinicians for improved cardiovascular care in primary care clinics using electronic health records (EHRs). (8)

Having said that, there are still mixed findings about the success of P4P programs. In addition, the affordability element has only recently been added in many of these programs. Also, there is a possibility of controversies between payers and providers.  Therefore, implementation of P4P programs require more research and experimentation, which would include thoughtful assessment over a period of time to identify design elements in order to positively affect outcomes. (1) Furthermore,  measures need to be used strategically as part of a major quality improvement initiative, together with increased investment in the basics of measurement development. (9)

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  1. Pay-for-performance. Health Affairs- Health Policy Briefs.  October, 2012. 
  2. Epstein AM, Lee TH, Hamel MB. Paying physicians for high-quality care. N Engl J Med 2004; 350:406-10.
  3. Mendelson A, Kondo K, Damberg C, et al. The effects of pay-for-performance programs on health, healthcare use and processes of care – A systematic review. Ann Intern Med 2017; 166:341-353.
  4. Institute of Medicine. Report Brief. Crossing the Quality Chasm: A New Health System for the 21st Century. 2001. 
  5. What is pay for performance in healthcare? NEJM Catalyst. March, 2018.
  6. Damberg CL, Sorbero ME, Lovejoy SL, et al. Measuring Success in Health Care Value-Based Purchasing Programs: Findings from an Environmental Scan, Literature Review, and Expert Panel Discussions. Santa Monica, CA: RAND Corporation; 2014. Available at:
  7. Hongjiang li. Pfizer launches China’s first pay-for-performance model for cancer. January, 2019.
  8. Effect of pay-for-performance incentives on quality of care in small practices with electronic health records: a randomized trial. JAMA 2013; 310(10):1051-9.
  9. Koutnik-Fotopoulos E. Pay-for-performance: Does it really work? Managed Healthcare. 

Written byMs. Tanvi Laghate

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