At EHS Christ Hospital and Medical Center, an eight‐step process improvement model was developed that incorporates continuous quality improvement concepts for monitoring, evaluating, and improving patient care. Nursing home residents admitted with pneumonia were identified as the group having the most influence on mortality and costs associated with treatment of pneumonia at our hospital. A multidisciplinary team evaluated clinical resource use and patient care processes, and identified root causes of variations influencing treatment. Clinical guidelines were created and outcomes were defined, resulting in significant improvement in the clinical management of these patients. Average length of stay decreased from 8.6 days in 1992 to 7.6 days in 1993, with a charge reduction of $1830 per patient. The methodologic framework of a process improvement program combines epidemiologic, clinical, and quality improvement sciences. This mix is essential in improving patient care and quantifying outcome