Using Performance-Based Payments to Improve Health Programs
Linking the payment of funds with the results of service activities is a powerful strategy that funding organizations can use to make the service-providing organizations accountable for achieving program goals. This new strategy offers financial incentives and holds great promise for improving performance of health services. It can be applied in both the public and the private sectors and at different levels of a national health system.
The use of performance-based payments for funding health services is a relatively new concept. Though much remains to be learned about the design and implementation of performance-based payment systems, experience shows that collaborative partnerships between payers and service-providing organizations can contribute to success. In such partnerships, the payers and service providers jointly determine the key performance areas, define performance targets, and assess performance.
This issue of The Manager presents a system for funding programs that is tied to program performance to help providers improve their services and the impact of those services in the client population. This issue explains how different payment mechanisms encourage different types of organizational behavior, and why performance-based payment schemes are more likely to help achieve the desired goals than traditional payment schemes.