Does Pay-for-performance Improve the Quality of Health Care?

Background: Most physicians and hospitals are paid the same regardless of the quality of the health care they provide. This produces no financial incentives and, in some cases, produces disincentives for quality. Increasing numbers of programs link payment to performance.

Purpose: To systematically review studies assessing the effect of explicit financial incentives for improved performance on measures of health care quality.

Data Sources: PubMed search of English-language literature (1 January 1980 to 14 November 2005), and reference lists of retrieved articles.

Study Selection: Empirical studies of the relationship between explicit financial incentives designed to improve health care quality and a quantitative measure of health care quality.

Data Extraction: The authors categorized studies according to the level of the incentive (individual physician, provider group, or health care payment system) and the type of quality measure rewarded.

Data Synthesis: Thirteen of 17 studies examined process-of-care quality measures, most of which were for preventive services. Five of the 6 studies of physician-level financial incentives and 7 of the 9 studies of provider group-level financial incentives found partial or positive effects on measures of quality. One of the 2 studies of incentives at the payment-system level found a positive effect on access to care, and 1 showed evidence of a negative effect on access to care for the sickest patients. In all, 4 studies suggested unintended effects of incentives. The authors found no studies examining the optimal duration of financial incentives for quality or the persistence of their effects after termination. Only 1 study addressed cost-effectiveness.

Limitations: Few empirical studies of explicit financial incentives for quality were available for review.

Conclusions: Ongoing monitoring of incentive programs is critical to determine the effectiveness of financial incentives and their possible unintended effects on quality of care. Further research is needed to guide implementation of financial incentives and to assess their cost-effectiveness.