The dysfunctional consequences of a performance measurement system: The case of the Iranian national hospital grading programme

Objectives: Performance measurement systems are increasingly used to reward and improve provider performance. However, such initiatives may also inadvertently induce a range of unintended and dysfunctional side-effects. This study explores the unintended and adverse consequences induced by the Iranian national hospital grading programme, which incorporates financial incentives for meeting nationally defined standards. Methods: We interviewed key informants across four key groups with a legitimate interest in healthcare performance: four purposively selected hospitals; four health insurance organizations; the Iranian hospital accreditation body; and one grading agency. The transcribed interviews and field notes were analysed thematically, and subsequently, member checking was conducted. Results: Seven dysfunctional consequences were identified: misrepresentation of data by hospitals; increased anxiety and stress among hospital employees; tunnel vision; financial pressures on poorly graded hospitals; incentives to purchase unnecessary equipment; erosion of public trust; and restricting access to hospital services by patients. These were caused by the way the grading system was implemented: poor standards of audit; the way in which the audit process was conducted; and the timing of audits. The pay for performance element of the grading system and the focus on structural aspects in the standards made improvement in grading particularly difficult for those hospitals that had been assessed as under-performing. Conclusion: Although the Iranian hospital grading system has resulted in a significant increase in the adoption of national standards, it has nevertheless induced a range of perverse outcomes. To mitigate these requires further refinement and recalibration of the system. © The Author(s) 2015