Research on the effects of pay-for-performance (P4P) in health care indicates largely disappointing results. This central finding, however, may mask important heterogeneity in the effects of P4P. We conducted a literature review to assess whether hospital and physician performance in P4P vary by patient and catchment area factors, organizational and structural capabilities, and P4P program characteristics. Several findings emerged: organizational size, practice type, teaching status, and physician age and gender modify performance in P4P. For physician practices and hospitals, a higher proportion of poor and minority patients is consistently associated with worse performance. Other theoretically influential characteristics-including information technology and staffing levels-yield mixed results. Inconsistent and contradictory effects of bonus likelihood, bonus size, and marginal costs on performance in P4P suggest organizations have not responded strategically to financial incentives. We conclude that extant heterogeneity in the effects of P4P does not fundamentally alter current assessments about its effectiveness.
Keywords: financial incentives; organizational variation; pay-for-performance; quality.