Paying for performance for health care in low- and middle-income countries: an economic perspective

Pay for Performance (P4P) arrangements, which are fixtures of health systems in high-income countries (HIC), have been deployed across many low- and middle-income country (LMIC) settings as well. P4P programs in HICs have typically addressed the challenge of ‘over delivery’, controlling costs while maintaining adequate services and getting the best clinical practice, or quality of care. In LMICs, health systems are similarly concerned with issues of quality, but they may also grapple with problems of low demand, lack of resources and poor governance. By revisiting the overall framework for understanding P4P arrangements, their benefits and their risks in the context of healthcare delivery, this paper draws on experiences with P4P in HIC to assess how the insights from economic theory apply in practice in LMICs. Issues of programme design and unintended consequences are summarized and LMIC case examples of where these concepts apply and are missing from the evidence of P4P programs in LMIC settings are also reviewed. The evidence on P4P in LMICs is still in its infancy, both in terms of evidence of impact (especially as far as health outcomes are concerned), and in in terms of the attention to potential unintended consequences. However, it is critical to return to basic economic understanding of how the contractual arrangements and incentives of P4P inform program design and ultimately impact health outcomes and service delivery.