[This article was originally published in HealthcarePapers, Volume 6, Number 4.]

Public health systems in other countries have been experimenting with pay mechanisms that specifically target improvements in productivity and quality. The potential gains are huge, but actual results are less certain, since they rely on a detailed and strategic understanding of local incentives. Canada is a slow joiner for reasons that are rarely discussed, but that may be related to some fundamental issues that make our existing payment mechanisms incompatible with pay-for-performance (P4P). As the international community sets new standards for both quality and productivity in healthcare, Canadians will find it increasingly difficult to stay with their existing pay mechanisms, safe as they may seem to us at the moment. The transition, which will not be easy, will force us to take a hard look at some of the values we take for granted.