Health Policy 58 (2001) 243–262
Financial incentives in health care. The impact
of performance-based reimbursement
*, Runo Axelsson
, Bengt Arnetz
Centre for De6elopment of Health Ser6ices, Box
, Stockholm, Sweden
Department of Public Health and Caring Sciences, Section of Social Medicine, Uppsala Uni6ersity,
Department of Public Health Sciences, Di6ision of Social Medicine, Karolinska Institute,
Received 23 May 2000; accepted 19 May 2001
The key question addressed in this study is whether performance-based reimbursement
(PBR) is a useful way to create the right incentive for efﬁciency improvements in health care.
In this 4-year prospective cohort study, physicians in one council with PBR and in ten
councils without such a system were studied. The results of this study indicate that PBR,
compared to an annual budget system, creates a different incentive, an ‘inner incentive’
which may be stronger than the external incentive of ﬁnancial pressures. PBR may result in
a greater cost awareness and shorter average length of stay, but it may also lead to negative
effects on the quality of care. A strong cost awareness was found to be a negative predictor
of quality of care indicating that it is a difﬁcult balancing act to maintain cost considerations
at a ‘good’ level in order to retain the beneﬁts of cost awareness without adversely impacting
quality of care. There is a need for further studies of the impact of PBR on ﬁnancial
performance and quality of care issues. © 2001 Elsevier Science Ireland Ltd. All rights
Financial incentive; Performance-based reimbursement; Cost awareness; Quality of care
* Corresponding author. Tel.: +46-8-51778138; fax: +46-8-51778155.
firstname.lastname@example.org (E. Forsberg).
0168-8510/01/$ - see front matter © 2001 Elsevier Science Ireland Ltd. All rights reserved.