Equitable healthcare distribution

Does Paying for Performance Widen the Healthcare Gap?

Soraya Malik in Health & Wellness December 2025 • 4 min read.

"New study examines if incentive programs unintentionally increase inequalities in healthcare access and quality across different providers."

Healthcare systems worldwide are constantly seeking ways to improve the quality of care and ensure better outcomes for patients. One popular strategy is "payment for performance" (P4P) programs, where healthcare providers receive financial incentives for meeting pre-defined performance targets. The idea is simple: reward good performance and motivate improvement.

However, the real-world impact of P4P is complex. While many studies have looked at the average effects of these programs, fewer have examined how they affect different types of healthcare facilities. Do P4P programs benefit all facilities equally, or do they inadvertently widen the gap between well-resourced and under-resourced providers?

A groundbreaking study in Tanzania sheds light on this critical question. Researchers investigated how P4P programs influenced service coverage and performance across a diverse range of health facilities. The findings reveal both the potential benefits and the potential pitfalls of P4P, offering valuable lessons for designing more equitable and effective incentive programs.

Unintended Consequences: How P4P Can Increase Inequality

The Tanzanian study revealed that P4P programs initially favored better-equipped facilities. Hospitals and health centers, with more resources and wealthier patient populations, often received higher payouts than dispensaries. This created a situation where those already better off benefited even more, potentially exacerbating existing inequalities.

Several factors contributed to this initial imbalance:

Resource Advantage: Facilities with more medical supplies and better infrastructure were naturally better positioned to meet the performance targets and earn incentives.
Wealthier Catchment Areas: Facilities serving wealthier populations had an easier time increasing service use, as these communities often have better access to transportation, information, and resources.
Incentive Structure: The design of the P4P program itself played a role. Targets based on absolute coverage rates could be more easily achieved by facilities that were already performing well.

However, the study also uncovered a positive trend: these inequalities tended to decline over time. As the P4P program matured, facilities with lower baseline performance started to catch up, demonstrating the potential for P4P to drive improvement across the board. This catch-up effect was particularly evident in the coverage of institutional deliveries, where facilities with low initial rates showed the most significant gains.

Designing for Equity: Lessons from Tanzania

The Tanzanian study offers critical insights for designing P4P programs that promote equity and avoid unintended consequences. It underscores the importance of considering the existing disparities between healthcare providers and tailoring incentives to address these imbalances.

One key takeaway is that a one-size-fits-all approach to P4P can be detrimental. Performance targets should be adjusted based on baseline performance levels, ensuring that all facilities have a realistic opportunity to earn incentives. 'Equity bonuses' can be used to provide additional support to disadvantaged facilities, helping them overcome resource constraints and improve their capacity to deliver quality care.

Ultimately, the goal of P4P should be to improve healthcare for all, not just the best-resourced providers. By carefully considering incentive design and addressing structural inequalities, policymakers can harness the power of P4P to create a more equitable and effective healthcare system.

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This article is based on research published under:

DOI-LINK: 10.1093/heapol/czy084, Alternate LINK

Title: Does Payment For Performance Increase Performance Inequalities Across Health Providers? A Case Study Of Tanzania

Subject: Health Policy

Journal: Health Policy and Planning

Publisher: Oxford University Press (OUP)

Authors: Peter Binyaruka, Bjarne Robberstad, Gaute Torsvik, Josephine Borghi

Published: 2018-10-31

Everything You Need To Know

What are 'payment for performance' programs in healthcare?

Payment for performance programs, or P4P, are initiatives where healthcare providers are given financial incentives when they achieve specific performance targets. The primary goal is to improve the quality of care by rewarding good performance and motivating further improvement across various healthcare services.

According to the Tanzanian study, how can 'payment for performance' programs lead to increased inequality?

The Tanzanian study demonstrated that P4P programs can initially favor healthcare facilities that are already better equipped. This happens because hospitals and health centers with more resources and wealthier patient populations can more easily meet performance targets and receive higher payouts compared to dispensaries with fewer resources. This can inadvertently increase existing inequalities in healthcare.

What factors contribute to the initial imbalance observed in 'payment for performance' programs?

Several factors contribute to the initial imbalance in P4P programs. Resource advantage plays a key role, as facilities with more medical supplies and better infrastructure are better positioned to meet targets. Wealthier catchment areas also help because these populations have better access to transportation, information, and other resources. Additionally, the design of the P4P program itself, especially targets based on absolute coverage rates, can favor facilities that are already performing well.

Do 'payment for performance' programs always widen the healthcare gap, or can inequalities decrease over time?

Although P4P programs can initially widen healthcare gaps, the Tanzanian study found that these inequalities tend to decline over time. Facilities with lower baseline performance start to catch up, demonstrating the potential for P4P to drive improvement across the board. This catch-up effect was particularly noticeable in the coverage of institutional deliveries, where facilities with low initial rates showed significant gains. However, the speed and extent of this catch-up can vary, and specific design elements are needed to ensure equitable outcomes.

What lessons from the Tanzanian study can be applied to design more equitable 'payment for performance' programs?

The Tanzanian study emphasizes the importance of designing P4P programs that promote equity by considering existing disparities between healthcare providers. It suggests tailoring incentives to address these imbalances, ensuring that under-resourced facilities have the support needed to meet performance targets. This includes addressing resource limitations, modifying target setting approaches to account for baseline performance, and providing targeted support to improve service delivery in disadvantaged areas.