This study is unique because it uses multiple regression and data envelopment analysis (DEA) to evaluate teaching hospital quality. The results support the premise that teaching hospital leadership through the effective allocation of resources can improve the quality of care. This study has managerial implications by demonstrating the positive correlation between HMO market penetration and improved clinical quality outcomes. This would suggest that improved efficiency caused by limited HMO reimbursement and tight utilization controls encourage hospitals to cut waste as well as improve their clinical care processes. Additionally, our research found that teaching hospitals with higher levels of long-term debt also had improved quality. This shows that increased investments in facilities and advanced technology at teaching hospitals can lead to enhanced quality.