The key question addressed in this study is whether performance-based reimbursement in health care affects the professional power and autonomy of physicians, and if so, whether this has any consequences for the quality of care. This cohort study examines the period 1994-98 in 11 Swedish county councils. Four hundred and eighteen physicians were studied in Stockholm County Council, which has a performance-based reimbursement system, and in ten councils without such a system. The results show that professional power and autonomy are considered to be very limited in all councils, and that they have decreased during the period studied. Professional autonomy is, however, more limited in Stockholm. The limitations in Stockholm are more related to financial considerations, whereas the limitations in the other councils are more due to guidelines and lists of recommended drugs. Professional autonomy and power were found to be important determinants for quality of care, and the physicians in Stockholm estimated the quality of care lower than their colleagues in the ten other councils. Thus, our study suggests that the performance-based reimbursement system might fail to reach the desired results due to its negative impact on professional power and autonomy.