While health spending in the United States far surpasses that in other industrialized nations, the quality of care in the US is no better overall, and on several measures it is worse. This stark fact has led to a wave of payment reforms that shift from rewarding volume (as fee for service does) to rewarding quality and efficiency. Such pay-for-performance schemes seem to be common sense and are now widely used by private payers and Medicare. But astonishingly, there's little evidence that they actually improve quality. What do we really know about the effectiveness of using financial incentives to improve quality and reduce costs in health care?