Ethiopia’s progress in health improvements faces sustainability challenges due to financial constraints. This peer reviewed study examines the impact of various provider payment mechanisms (PPMs) on health system goals. Line-item budgets are predictable but don’t enhance efficiency, while fee-for-service improves care quality but harms efficiency and sustainability. Capitation and performance-based financing promote equity and quality but increase administrative burdens. The study suggests a blended PPM approach to balance quality, efficiency, and sustainability.