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This article compares the ability of hospital and physician characteristics to explain variations in length of stay and mortality, controlling for factors associated with severity of illness. The analysis is based on 54,571 discharges, covering 11 medical and five surgical conditions, from nonfederal general hospitals in one state during 1988. Results suggest that both hospital and physician characteristics are important predictors of both outcome measures. Contrary to previous research, the volume of patients with the same condition treated by the hospital increases both length of stay and mortality. The volume of patients with the same condition treated by the physician increases length of stay among patients with medical conditions, decreases length of stay among those with surgical conditions, and decreases mortality. One interesting finding is that the medical school attended by the physician influences the patient's length of stay. Findings are interpreted in light of research evidence on factors affecting medical outcomes and recent federal efforts to improve quality of care.