The concept of pay-for-performance (P4P) encompasses different strategies that aim to stimulate health care quality improvement by remunerating healthcare providers according to their performance in specific measures of efficiency or quality. Although the effectiveness of P4P in improving quality of care is largely unknown, these systems are being widely adopted in the United Kingdom, the United States and other countries, including Spain. The elements of P4P design that are most decisive for the effectiveness of these schemes are as follows: 1) who should receive the incentives, how they should be paid, what should be rewarded, the need to incorporate risk adjustments (mainly if surrogate outcomes are used as indicators) and the need to bear organizational climate and the optimal combination of financial and non-financial incentives in mind. The most important limitations to consider are the following: 1) the exclusive focus on reducing subutilization; 2) the effect on equity; 3) the "magnifying glass" effect; 4) the validity of indicators; 5) the confusion between the recommendations of clinical guidelines and quality indicators; 6) "document engineering"; 7) paternalism; 8) the negative impact on professionalism and clinicians' internal motivation, and 9) the assumption that quality problems result from imperfect individual decisions rather than from an imperfect system.