Unintended Consequences of Pay-for-Performance (P4P) for Hospitals – USA


Healthcare is in a crisis in USA, one it spends the highest per cent of its GDP on healthcare and on other, still has the unhealthiest population.

Faced with limited budget, Government is trying to get the most bang for its bucks, trying for both efficiency and effectiveness.

Law of unintended Consequences – Efficiency vs. Effectiveness

Unfortunately, due to Law of unintended Consequences, setup a conflict between efficiency and effectiveness. Too much focus on efficiency, which is looks great in short term, leads to unintended consequences by reduced effectiveness.

To improve the efficiency of Hospitals,  pay-for-performance (P4P) programs reward based on criteria of quality and are expect to lead to lower costs.

Unintended Consequences of above policy

However, as the patient populations is composed of diverse racial and ethnic backgrounds, each having its specific health profile – based on genetics and lifestyle, not anticipating the Law of Unintended Consequences has ended up  penalizing hospitals who disproportionately treat those segments of populations.

Suggested Solutions to Unintended Consequences

Therefore, it is suggested that pay-for-performance program should be modified to also accomodate the diversity in health profiles based on ethnic and lifestyle differences, since recovery/survival rates are determined by these factors too.


When intervening in complex social situations, it is essential to avoid simplistic solutions and  put extra efforts to anticipate Unintended Consequences .


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