Pay-for-Performance and Value-Based Purchasing in Healthcare


Healthcare organizations normally provide incentives to healthcare professionals while also monitoring their performance and impact on the patients to improve the population’s health. This is achieved through the use of pay-for-performance and value-based purchasing techniques. Pay-for-performance offers financial inducements and rewards to healthcare providers according to their productivity. In contrast, value-based purchasing rewards healthcare specialists based on the quality and cost of care offered to generate positive patient outcomes (Martin et al., 2020). The paper analyzes the impact of pay-for-performance and value-based purchasing on healthcare organizations.

Impact of Pay-for-Performance

One of the fundamental impacts of pay-for-performance in healthcare organizations is increased motivation among healthcare providers. The financial rewards offered to healthcare professionals inspire them to focus on accomplishing their tasks while avoiding unnecessary behaviors like absenteeism. As a result, the healthcare staff works hard and develops their competencies to improve their performance to attain higher pay (Mendelson et al., 2020). The increased performance yields higher productivity as healthcare specialists attend to more patients to advance their health standards, leading to augmented profitability levels.

Secondly, pay-for-performance establishes healthcare organizations’ values and provides healthcare professionals with more control. This model compels the healthcare workforce to align with the anticipated organizational objectives to achieve higher pay. Consequently, the entire staff focuses on demonstrating ethical behaviors to achieve higher performance levels that attract better pay. Pay-for-performance allows healthcare providers to control the compensation levels to meet their projected needs (Mendelson et al., 2020). This is because the workforce can choose to increase their performance levels through refining their skills or working harder to achieve higher pay.

Lastly, pay-for-performance helps healthcare facilities attract and retain competent and experienced workers. Individuals are always focused on working in organizations that provide opportunities for higher compensation to meet their needs and improve their quality of life. The increased retention rates enhance smooth succession planning to maintain continuity of services and outstanding reputation. However, pay-for-performance is associated with reduced job satisfaction, less teamwork, and a high concentration on the quantity of work. Healthcare providers that have low performance end up attaining relatively low compensation, thus remaining discouraged (Mendelson et al., 2020). Healthcare workers may demonstrate low performance due to inadequate competencies and physical disabilities. The pay strategy reduces teamwork as individuals focus on working independently to attain better compensation. Additionally, pay-for-performance coerces healthcare organizations to focus on quantity instead of quality to create positive patient outcomes.

Impact of Value-Based Purchasing

Value-based purchasing helps minimize costs and augment patient and healthcare provider satisfaction. This approach focuses on promoting excellent services that match patients’ needs, thus reducing readmissions and hospitalizations, which in turn assists patients in minimizing healthcare costs. The provision of quality care aids healthcare organizations cut costs as they avoid unnecessary lawsuits that arise from poor healthcare services. The decision to offer quality services to patients increases their satisfaction levels, encouraging them to seek more care services (Harrison et al., 2017). Additionally, providing better incentives and rewards to healthcare providers because of offering quality care and minimizing costs upsurges their satisfaction levels, coercing them to focus on their duties and responsibilities.

Value-based purchasing promotes healthy habits and minimizes medical errors in healthcare organizations. Healthcare professionals are rewarded for healthy behaviors, thus helping them live better lives. The initiative also enables healthcare providers to avoid medical mistakes leading to efficient resource utilization and safe and quality care. However, value-based purchasing is linked with increased patient load causing burnout and the inability to offer quality care (Martin et al., 2020). The initiative may also be misleading to patients as they may fail to identify hospitals that provide low-cost services.


Healthcare organizations should offer better compensation to healthcare providers and ensure that patients receive quality care that matches their needs. This can be achieved by adopting pay-for-performance and value-based purchasing to outshine the potential competitors in the market. The positive impacts of pay-for-performance and value-based purchasing surpass their associated shortcomings; hence, healthcare organizations should empower and develop all healthcare professionals and set the right environment to provide quality care.


Harrison, J. P., Harrison, D. A., Howey, R., & Walters, R. (2017). Is value-based purchasing the new reality in healthcare? Journal of Health Care Finance, 43(4), 1-13.

Martin, B., Jones, J., Miller, M., & Johnson-Koenke, R. (2020). Health care professionals’ perceptions of pay-for-Performance in practice: A qualitative Metasynthesis. INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 57(1), 1-17. Web.

Mendelson, A., Kondo, K., Damberg, C., Low, A., Motúapuaka, M., Freeman, M., O’Neil, M., Relevo, R., & Kansagara, D. (2017). The effects of pay-for-Performance programs on health, health care use, and processes of care. Annals of Internal Medicine, 166(5), 341-353. Web.

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