Physician payment system (PPS) is a principal incentive system to motivate doctors to provide excellent care for patients. During the past decade, physician remuneration in China has not been in proportional to physician's average work load and massive responsibilities. This paper reviewed the constitution of the PPS in China, and further discussed the problems and issues to be addressed with respect to pay for performance. Our study indicated that the lower basic salary and bonus distribution tied to "profits" was the major contributor to the physician's profit-driven incentive and the potential cause for the speedy growth of health expenditures. We recommend that government funding to hospitals should be increased to fully cover physicians' basic salary, a flexible human resource and talent management mechanism needs to be established that severs personal interest between physicians and hospitals, and modern performance assessment and multiplexed payment systems should be piloted to encourage physicians to get the more legitimate compensation.