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Objectives: Despite substantial enthusiasm among insurers and federal policy makers for pay-for-performance incentives, little is known about the current scope of these incentives or their influence on the delivery of care. To assess the scope and magnitude of pay-for-performance (P4P) incentives among physician groups and to examine whether such incentives are associated with quality improvement initiatives., Study Design: Structured telephone survey of leaders of physician groups delivering primary care in Massachusetts. ASSESSED METHODS: Prevalence of P4P incentives among physician groups tied to specific measures of quality or utilization and prevalence of physician group quality improvement initiatives., Results: Most group leaders (89%) reported P4P incentives in at least 1 commercial health plan contract. Incentives were tied to performance on Health Employer Data and Information Set (HEDIS) quality measures (89% of all groups), utilization measures (66%), use of information technology (52%), and patient satisfaction (37%). Among the groups with P4P and knowledge of all revenue streams, the incentives accounted for 2.2% (range, 0.3%-8.8%) of revenue. P4P incentives tied to HEDIS quality measures were positively associated with groups' quality improvement initiatives (odds ratio, 1.6; P = .02). Thirty-six percent of group leaders with P4P incentives reported that they were very important or moderately important to the group's financial success., Conclusions: P4P incentives are now common among physician groups in Massachusetts, and these incentives most commonly reward higher clinical quality or lower utilization of care. Although the scope and magnitude of incentives are still modest for many groups, we found an association between P4P incentives and the use of quality improvement initiatives.