November 1, 2004
John F. Kennedy School of Government, Harvard University

Studies show that current provider payment systems tend to discourage quality improvement in the health care system. A frequently suggested solution is "paying for performance," a reference to a range of strategies to reorient payment incentives by rewarding efforts to improve quality. Quality problems have been documented for decades, both in fee-for-service and managed care delivery systems. Paying for performance is a relatively new approach to address longstanding quality problems, by rewarding providers for delivering care that is clinically effective and results in improved health.