BACKGROUND: Evidence-based management assumes that available research evidence is consistent with the problems and decision-making conditions faced by those who will utilize this evidence in practice. PURPOSE: This article attempts to identify how hospital leaders view key determinants of hospital quality and costs, as well as the fundamental ways these leaders "think" about solutions to quality and cost issues in their organizations. The objective of this analysis is to better inform the research agenda and approaches pursued by health services research so that this research reflects the "realities" of practice in hospitals. METHODS: We conducted a series of semistructured interviews with a convenience sample of eight hospital and three health system leaders. Questions focused on current and future challenges facing hospitals as they relate to hospital quality, costs, and efficiency, and potential solutions to those challenges. FINDINGS: Nine major organizational and managerial factors emerged from the interviews, including staffing, evidence-based practice, information technology, data availability and benchmarking, and leadership. Hospital leaders tend to think about these factors systemically and consider process-related factors as the important drivers of cost and quality. PRACTICE IMPLICATIONS: The results suggest a need to expand the methods utilized by health services researchers to make their research more relevant to health care managers. Expanding research methods to reflect the systemic way that managers view the challenges and solutions facing their organizations may enhance the application of research findings into management practice. Finally, better communication is needed between the research and practice communities. Researchers must learn to think more like managers if their research is to be relevant, and managers must learn to more effectively communicate their issues with the research community and frame their problems in researchable terms. © 2007 Lippincott Williams & Wilkins, Inc.