“Pay for Performance”(P4P) is a new phenomenon intended to incentivize physicians and hospitals to render high quality by paying them differently if they perform in accordance with criteria. From Leapfrog, to CMS, to the Bridges to Excellence program and the activities of the Integrated Health Association in California, there are many variations on this theme. That the government is in this game can also be seen in a little noted provision in HR 1 that the formerly ‘voluntary’ hospital quality reporting initiative is now not quite so voluntary since hospitals that do not report their data to CMS will experience a .4% reduction in their Medicare payment, each year they do not report. In “Contracting for Quality: Then, Now and P4P” we explore the impetus for these programs, describe and analyze their principal manifestations and consider how they relate to the contractual context within which they arise, both for hospitals and physicians. We conclude that while pay for performance is an important development, it is, at best, transitional and, as we first discussed in our White Paper “Doing Well by Doing Good: Improving the Business Case for Quality” these initiatives do not make an adequate case for offering physicians improved financial margins despite increased revenue. In addition, because these are ‘add-ons’ to the existing contractual environment and the P4P programs often unfold with no supporting contract at all, they present real and unexplored challenges for the providers who participate. We continue to believe that payment systems that carve out a new approach with many of the same goals and features of these P4P programs are better.