considerable variation between suppliers, which suggests that factors such as an individual‘s intrinsic motivation, professional standards, and preferences were important moderators of financial incentives.

In the U.S. context, several insurance providers and health maintenance organizations have experimented with elements of financial incentives for care providers in various states. An early study of health maintenance organizations (HMO) managers‘ views on financial incentives found mixed support for the effectiveness of performance pay (Hillman, Pauly, et al. 1991) in the eyes of managers.

More recently, several studies have found fairly positive effects of performance incentives on health services, patient outcomes and satisfaction. (Safran, Rogers, et al. 2000) use a cross-sectional study of Massachusetts adults to assess the effects of various health-maintenance organizations (HMO) and their specific contract elements on primary care. One of the results links financial incentives for physicians to patient satisfaction. An evaluation of performance pay pilot program for physicians found meaningful improvements for diabetes patients compared to the control group (D. and Horrigan 2005). Small positive or mixed effects were also found studies by (Amundson, Solberg, et al. 2003; Casalino, Gillies, et al. 2003; McMenamin, Schauffler, et al. 2003; Levin-Scherz, DeVita, et al. 2006; Coleman, Reiter, et al. 2007; Felt-Lisk, Gimm, et al. 2007; Mandel and Kotagal 2007; Young, Meterko, et al. 2007).

(Rosenthal, Frank, et al. 2005) analyze a natural experiment, comparing quality improvements in two physician groups in the U.S. from 2001 to 2004. They find improvements in cervical cancer screenings but not other outcomes, largely rewarding practices with a high baseline performance. In a cross-sectional sample of primary care physicians that contracted with Medicaid managed care organizations in 2002 in California found a partially positive effect of incentive pay on STD care (Pourat, Rice, et al. 2005).

(Lindenauer, Remus, et al. 2007) analyze the effects of public reporting and pay-for-performance in hospital care in a Medicare/Medicaid demonstration project. Hospitals participating in the performance scheme show a significant improvement in overall measures of patient care quality, including care for heart failure, acute myocardial infection and pneumonia by up to 16%, compared to the control group. In a related, but patient-level study (Glickman, Ou, et al. 2007) evaluate the largest pay-for-performance pilot project in the U.S., finding no conclusive effects for several treatments and patient outcomes.

Similarly, (Pearson, Schneider, et al. 2008) find that pay-for-performance elements in physician contracts in Massachusetts did not add any significant gains above and beyond secular improvement in a time period from 2001-2003. In a study of public community health centers in Houston, (Gavagan, Du, et al. 2010) also find no effects of performance pay, while (Chung, Palaniappan, et al. 2010) find no effects for primary care physicians in California. Mirroring the results found in other areas, while financial incentives can improve particular behavioral responses of staff members, it is difficult to design an incentive scheme that does not also produce unintended consequences and rewards unwanted behavior. (Shen 2003) provides evidence of gaming and selection effects of financial incentives for substance abuse care providers. (Li, Hurley, et al. 2011) utilize a natural experiment in Ontario, assessing the effect of performance-related pay on physician behavior and targeted primary care provision. They do find positive results for some, but not all financial incentives, providing a cautionary message with regard to the potential impact of performance pay.

Importantly, all these studies evaluate performance pay for specific, easily measurable tasks, in a highly institutionalized environment with powerful monitoring capabilities. Observational studies dealing with performance pay in the health care sector in the developing country context are much fewer in number and can draw on fewer large-scale experiences. Despite the lack of widespread use of incentive pay in the developing world, incentive focused reforms for doctors and nurses have received some attention. (Vujicic 2009) outlines the potential benefits of performance pay for health services staff, but also 18