Basic Economics of Results-Based Financing in Health

RBF programs are not new. High-income countries with health systems as varied as Spain, Sweden, the United Kingdom and the United States all use rewards to hospitals, providers, and insurers for meeting volume and quality targets. International efforts to improve health in developing countries are increasingly exploring ways to improve results through material incentives under initiatives like Output-Based Aid, Pay for Performance (P4P), Performance-Based Financing (PBF), Performance-Based Aid and Cash on Delivery. This growing attention and experimentation with RBF has led to increasing clarity about its main features and evidence is mounting with regard to the approach’s strengths and limitations.

This paper provides an economic foundation for understanding RBF programs, classifying them, and exploring their strengths and weaknesses.