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Objective. To determine whether hospitals increase efforts on easy tasks relative to difficult tasks to improve scores under pay-for-performance (P4P) incentives. Data Source. The Centers for Medicare and Medicaid Services Hospital Compare data from Fiscal Years 2003 through 2005 and 2003 American Hospital Association Annual Survey data. Study Design. We classified measures of process compliance targeted by the Premier Hospital Quality Incentive Demonstration as easy or difficult to improve based on whether they introduce additional per-patient costs. We compared process compliance on easy and difficult tasks at hospitals eligible for P4P bonus payments relative to hospitals engaged in public reporting using random effects regression models. Principal Findings. P4P hospitals did not preferentially increase efforts for easy tasks in patients with heart failure or pneumonia, but they did exhibit modestly greater effort on easy tasks for heart attack admissions. There is no systematic evidence that effort was allocated toward easier processes of care and away from more difficult tasks. Conclusions. Despite perverse P4P incentives to change allocation of efforts across tasks to maximize performance scores at lowest cost, we find little evidence that hospitals respond to P4P incentives as hypothesized. Alternative incentive structures may motivate greater response by targeted hospitals. Key Words. Medicare, incentives in health care, quality improvement/report cards (interventions), Payers and policy makers are increasingly turning to pay-for-performance (P4P) and other value-based purchasing strategies in an attempt to control rapidly growing health care costs and improve quality of care. [...]