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Specialized hospital units developed historically for the efficiency of physicians, but their existence has created an opportunity for staff nurses to specialize as well. This study was done to test the hypothesis that specialized staff nursing has an effect on patient outcome as length of stay (LOS) and mortality, using casemix information and controlling for physician volume.Sixteen Diagnosis Related Groups associated with particular specialty units in Yale New Haven Hospital were selected. Five years of data (FY 1987-FY 1993) from a period in which specialized unit configuration was relatively stable were obtained (N = 11,316). Data elements included basic patient characteristics, especially diagnosis and procedure codes, physician identifiers as scrambled code numbers, length of stay, length of intensive care unit stay, and discharge disposition. Specialized nursing units were defined by the percentage of patients in a given diagnosis related group discharged from that unit. Patient age and differential intensive care unit use were used for risk adjustment.In 13 of the 16 diagnosis related groups, patients cared for on specialized nursing units had shorter lengths of stay; the difference was statistically significant in nine. In the seven Diagnosis Related Groups with any deaths, the mortality on the specialized unit(s) was lower; the difference was statistically significant in four. Physician volume, defined as more or fewer than 20 discharges per diagnosis related group had little or no effect on either length of stay or mortality.The notion that nurses improve at caring for similar patients of a stable group of physicians as their experience increases has common sense appeal. If the findings of this study can be replicated in other institutions, with the refinements suggested here, it may be possible to separate the effects of multidisciplinary practice on outcomes and to track the effect of hospital reeingineering projects that change patient mix or nursing specialization. Studying one hospital in depth suggested that interhospital studies of cost and quality may need to consider nursing specialization along with other comparisons.