Pay–for–performance (P4P) OR Performance-based incentive programs

Pay–for–performance (P4P) OR Performance-based incentive programs

Suyasha Koirala. Research Coordinator (KUSMS). MPH (SDU Denmark). BPH (IOM Nepal)


We often see active healthcare providers and lazy healthcare providers in the same institution. The burden of a job in a day defers among them however, they are paid in the same way regardless of the quality they provide. This frustrates and demotivates enthusiastic healthcare providers. This is not a single country issue which is why the interest in Pay–for–performance (P4P) is growing. It is designed to replace the fee for service (FFS) payment scheme. FFS is one of the three main methods of reimbursement, others are salary and incentives.  It is the traditional method where the healthcare providers are reimbursed for providing time and skill for the patients. In P4P schemes, health care providers are either rewarded (fees, bonuses) or punished by withholding payment, or repayments to payers based on their performance. Healthcare providers have to meet the pre-established targets of the organization or department goals and adhere to clinical guidelines. Thus, improving the health care quality and efficiency of the care. An example of a P4P program is UK Quality and Outcome Framework (QOF), PacifiCare Health Systems, etc.

The financial incentive programs are complex and vary widely starting from the motivation to start the P4P in health care. It can be either for the patient benefit or for economic interest. The incentive is provided either to the individual (medical officer/GP) or to the group (operation team). The financial incentive is provided not only at the physician level but also at the provider group level and the health care payment system level. Scope of P4P can be either general (number of patients enrolled in the hospital for the particular disease) or more specific like cancer screening. The incentive is paid for achieving a given comparative ranking among providers or for the continuous gradient of quality improvement. The frequency and duration can be annually or quarterly depending on the context.

Till now P4P is abundantly practiced in the USA, in some European countries (the United Kingdom, Germany, Italy, Spain), in Australia, Canada, Argentina, and in some Asian countries (China, South Korea, Taiwan, Israel). It is gaining popularity among health policymakers and private insurers.

Benefits of P4P

  • It encourages healthcare providers and hospitals to improve their performance. 
  • It is used for improving the quality of acute care, adherence to guidelines to treat chronic diseases (diabetics, Asthma, heart diseases), and preventive services (Cancer Screening, Immunization)

Need to consider

  • A country should have a proper recording and reporting system to monitor the outcome progress.
  • The result of P4P is affected by other interventions carried out in parallel.
  • The effectiveness of P4P is variable as it depends on the design and context in which it is introduced. 
  • Personal characteristics of the health care provider. 
  • Attainment of a predetermined level of performance and improvement needs to be considered while giving incentives as the healthcare provider/hospitals with the high performance will receive incentives by only maintaining the status while low performing groups are often discouraged as the benchmark levels of performance are high and difficult to reach. Further increasing inequality among healthcare providers/hospitals.


Pitfalls of P4P

  • Severely ill patients may be avoided in the case of outcome-based measurement. 
  • Reduction in the continuity of care.
  • Reduction of resources in unrewarded dimensions.


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