Making the 'pay' matter in pay-for-performance: implications for payment strategies.

Although pay-for-performance (P4P) is being widely adopted, little is known about how different P4P strategies affect provider payment. These differences may be essential in motivating and maximizing quality improvement across all providers. We review hospitals' P4P strategies and describe differences in payments by size of reward; payment differences between high- and low-performing providers; ability to reward improvement in the absence of high performance; and the percentage of payments based on performance. Bonuses vary considerably by payment strategy, which suggests that the strategy selected should vary depending on program goals. These findings are relevant to P4P for any type of provider.