Physician integration strategies are attempts to bring physicians into hospital administration by giving them a role on the hospital board, employing them in administrative or clinical capacities, or expanding the administration issues dealt with by medical staff committees. This study used a production function model to examine whether such strategies affect hospital output, measured as case mix-adjusted discharges. The article hypothesizes that less management depth, smaller medical staffs, and an absence of nearby hospitals make physician integration a more important strategy for rural than urban hospitals. American Hospital Association data on 1,309 hospitals from 1982 showed there is no statistically significant evidence that physician integration affects the output of urban hospitals. However, four of the five measures were associated with more patient discharges in rural hospitals. Furthermore, rural and urban hospitals differ in their use of other inputs. It was concluded that physician integration can be an effective mechanism to enhance rural hospital output and that more research on rural hospitals is needed. © Lippincott-Raven Publishers.