The medical record can be used for evaluating physician performance. Within the limitations described, it is an essential source of information on the delivery of care as well as a measure of proficiency. The process of care should be particularly emphasized, without neglecting appropriate outcome measures. The confounding of outcome measures by compliance factors, natural history of the disease process, severity of illness, status of defense mechanisms, performance of ancillary services, and personnel does not make this an attractive single measure of physician performance. Knowledge assessment and performance assessment play a complementary role; both are necessary to identify competency. The potential for improving medical care and the recording of essential findings by such an emphasis on individual assessment based on medical records is enormous. Technologic progress in recording and retrieving medical information is facilitating use of the record to measure proficiency. A carefully structured blend of cognitive examination to establish a knowledge base and review of the medical record to measure performance will provide better measures of competency.