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This paper aims to analyze the development of “pay‐for‐performance” (P4P) programs implemented by Israel's two largest sick funds, insuring 78 percent of the population.

Analysis of the main features and their evolution over time, the observed outcomes and concerns related to implementing these programs.

Our analysis revealed that although implementation has been successful, both managers and physicians have voiced concerns regarding the effect of measuring clinical performance such as focusing attention on the measured areas while neglecting other areas, and motivating a statistical approach to patient care instead of providing patient‐centered care.

The Israeli case provides an interesting example of nation‐wide, long‐term implementation of the pay‐for‐performance program. Therefore, it provides other countries with the opportunity to assess features that may facilitate successful implementation, as well as highlighting issues related to the outcomes of P4P programs.