Healthcare systems around the world are characterized by a suboptimal delivery of healthcare services. There has been a growing belief among policymakers that many deficiencies (e.g., in the quality of care) stem from flawed provider payment systems creating perverse incentives for healthcare providers. In several countries this has led to reforms based on pay-for-performance (P4P), a payment approach in which healthcare providers receive explicit financial incentives to improve the quality and efficiency of care. Over the past decade, P4P has attracted widespread interest, with programs being uncritically implemented in many countries. Because healthcare providers respond to financial incentives and because performance measurements have become increasingly sophisticated, many policymakers view P4P as a promising improvement strategy.