OBJECTIVES Initiatives aimed at improving both the quality and efficiency of United States healthcare are commonly grouped under the broad category of "pay-for-performance" (P4P) programs. Typically these programs award bonuses to providers that attain pre-determined quality and cost goals, but may also impose financial penalties on those that fail to meet those goals. Fueled by the Affordable Care Act, P4P programs have recently expanded significantly within the public sector and are expected to grow. This project was designed to review Medicare P4P cost measures, discuss the implications for provider prescribing patterns, and recommend possible alternatives. METHODS Two P4P programs, both well known under the health reform law and having potential to impact a large portion of the Medicare population, were evaluated: 1) Accountable Care Organizations (ACO), and 2) the Physician Value Based Payment Modifier (VBPM). Each program's cost measure components and calculation methodologies were isolated, described and evaluated for the potential to influence prescribing patterns. RESULTS Cost measures for the ACO and VBPM programs are based on payments made under Medicare Part A (Hospital Insurance) and Medicare Part B (Supplemental Insurance) but do not include Medicare Part D (Prescription Drug Benefit) costs. Whether performance is measured against the provider's historic costs, or compared to national benchmarks, only Medicare Parts A and B costs are included. CONCLUSIONS Medicare Part D costs are not included in the cost measure calculation, thereby eliminating prescription drug expense from the performance rating. This methodology may encourage providers to shift Part B drug costs to Part D, thus limiting patient access to therapies that may only be covered under Medicare Part B.