Introduction: Performance-based payment is a payment model that attempts to reward the measured dimensions of performance and encourages health service providers to achieve predetermined goals by financial incentives. This study aimed to identify executive challenges of performance-based payment from medical and educational hospitals managers’ perspective and offering solutions in Isfahan 2018. Methods: This study was a qualitative study. Semi structured interviews were used to collect data. The research population was 11 people (the managers of educational and medical hospitals in Isfahan) who were selected purposefully. All interviews were recorded and then written on a paper. The duration of the interviews varied between 45 to 60 minutes. The data were analyzed using MAXQDA120 software and based on thematic analysis. Results: In this study, , regarding executive challenges, seven themes and fifteen sub-themes were obtained, including the weakness of the performance-based payment project, weakness in education and educational support, low employee participation, weakness of information and communication technology, weakness of laws and regulations, unfavorable economic conditions of the public sector, and special conditions governing public hospitals.   Conclusion: performance-based payment, if implemented correctly, can lead to the improvement of quantitative and qualitative indicators related to employees’ performance. Correct implementation requires identifying challenges and obstacles and then corrective actions. This study was able to identify and present some of the operational challenges of the performance-based payment from the viewpoint of hospital managers.