Role of pay-for-performance in a hospital performance measurement system: a multiple case study in Iran

Pay for performance (P4P) is becoming increasingly popular in the health care sector as a tool for encouraging performance (especially quality) improvement. Evidence about the effect of policies in hospitals is rare and generally confined to developed countries. The Iranian hospital grading system, which links the charges hospitals can make for patient stay to the results of their annual performance grading, is one of the earliest examples of P4P in the world. We report here the first evaluation of the impact of the Iranian P4P system. We conducted a multiple case study using semi-structured interviews and observation in four hospitals with different ownership and grading results, to explore responses to the grading system and the P4P policy. The data were analysed using framework analysis assisted by Atlas-ti software. The findings showed hospital behaviour was influenced by and changed in response to P4P policy, despite serious concerns about the validity of the grading standards. The main driver for such changes was hospital revenue, which acted as a direct financial incentive for private hospital managers and as a factor for public hospital managers' sense of success and reputation. Frontline staff were motivated indirectly by higher revenue flowing into investment in better facilities and working environment. Other potential mechanisms by which the grading system could have influenced behaviour [such as patient and General Practitioner (GP) referral choice] did not appear to influence hospital behaviour.