Performance-Based Financing in Health Systems

Performance-based financing (PBF) has emerged as a strategic instrument to improve the effectiveness, equity and efficiency of health systems worldwide. By tying financial incentives to the achievement of defined service delivery targets, PBF seeks to align provider behaviour with broader health goals such as expanded coverage of essential services, improved quality of care and progress towards universal health coverage. Programmes typically offer bonuses or increased facility funding when providers meet or exceed metrics spanning structural inputs, technical and non-technical process standards, and service utilisation benchmarks. Implemented across low-, middle- and high-income settings, PBF schemes vary in their design, scope and governance arrangements, from small-scale pilots to national roll-outs integrated into health insurance frameworks. Evidence to date indicates that well-crafted PBF interventions can strengthen facility management, enhance the availability of drugs and equipment, and foster innovation in care pathways. However, outcomes are conditional on context-specific factors such as baseline resource constraints, managerial capacity, and complementary reforms in human resources and supply chains. Critics caution that excessive focus on incentivised indicators may divert attention from non-incentivised services, exacerbate inequities if targets are unattainable in under-resourced areas, or generate perverse effects when incentives are misaligned with patient-centred care. Ongoing refinements aim to balance quantitative targets with qualitative assessments, embed robust monitoring and evaluation, and ensure that incentive structures catalyse lasting system-wide improvements rather than transient gains.

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Performance-Based Financing in Health Systems publication trend

The graph below shows the total number of articles in performance-based financing in health systems across all publications each year (not limited to Nature Index journals).

Technical terms

Performance-Based Financing (PBF): A financing approach that links health provider payments to the achievement of predefined performance targets.

Capitation Payment: A fixed payment per patient to a provider for a specified set of services over a fixed period.

Structural Quality: The availability and condition of physical and organisational resources in health facilities.

Process Quality: The manner in which health services are delivered, encompassing both technical and non-technical aspects.

Out-of-Pocket Expenses: Direct payments made by patients at the point of service for healthcare services or goods.

References

1. Impacts of performance-based financing on health system performance: evidence from the Democratic Republic of Congo. BMC Medicine (2023).
2. Effects of performance-based capitation payment on the use of public primary health care services in Indonesia. Social Science & Medicine (2023).
3. A systematic review of the effect of performance-based financing interventions on out-of-pocket expenses to improve access to, and the utilization of, maternal health services across health sectors in sub-Saharan Africa. Journal of Global Health (2023).