"Pay for performance," a reimbursement method under which some physicians and hospitals are paid more than others for the same services because they have been deemed to deliver better quality care and their patients appear to have better outcomes, is enormously controversial. Disputes invariably arise over how "quality" should (or even can) be measured. Nevertheless, differentiating between medical providers, financially, lies at the heart of this new reimbursement innovation developed by insurance companies and employers. Its two main objectives are: (1) to increase the overall quality of health care that patients receive, and (2) to encourage behavioral change on the part of physicians and hospitals that leads to increased efficiency. This article attempts to explain where the momentum for "pay for performance" reimbursement has come from, why its advocates consider it an improvement upon existing payment systems, and how it can both positively and negatively affect medical providers.

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Copyright © 2006, Health Law Institute. This article first appeared in Health Law Review: 15:2 (2006), 14-22.

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