Present political pressures for hospital cost containment appear to make some form of case-specific reimbursement system inevitable. For such a system to be able to control hospital costs effectively, however, its design must reflect the fundamental and traditional principles of management control systems. Although the diagnostic-related group (DRG) approach is the most frequently discussed form of case-mix-sensitive reimbursement, DRG do not satisfy basic management control principles. Under a more appropriate hospital control system, however, physicians would be incorporated directly into the hospital''s management structure. Consequently, to ensure that this new control system is medically and financially appropriate, physicians should seize the initiative in determining the standards against which their performance will be measured.