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OBJECTIVE. This study explores the relationship between quality of care and investment in property, plant, and equipment (PPE) in hospitals. DATA SOURCES. Hospitals' investment in PPE was derived from audited financial statements for the fiscal years 1984-1989. Peer Review Organization (PRO) Generic Quality Screen (GQS) reviews and confirmed failures between April 1989 and September 1990 were obtained from the Massachusetts PRO. STUDY DESIGN. Weighted least squares regression models used PRO GQS confirmed failure rates as the dependent variable, and investment in PPE as the key explanatory variable. DATA EXTRACTION. Investment in PPE was standardized, summed by the hospital over the six years, and divided by the hospital's average number of beds in that period. The number of PRO reviewed cases with one or more GQS confirmed failures was divided by the total number of cases reviewed to create confirmed failure rates. PRINCIPAL FINDINGS. Investment in PPE in Massachusetts hospitals is correlated with GQS confirmed failure rates. CONCLUSIONS. A financial variable, investment in PPE, predicts certain dimensions of quality of care in hospitals.