Pay for performance got its start in ancient Mesopotamia, when physicians were compensated for successful surgery but would have a hand cut off if they made a mistake. Needless to say, today's programs are less barbaric.

In the past 20 years, pay-for-performance programs have become increasingly complex; rewarding "carrots" have been joined by "sticks" for lapses in quality. These programs may result not only in improved quality, but in reduced costs.