A good performance indicator reflects the quality of care and uses clinical outcomes. When outcomes are difficult to obtain, process and structure variables can provide a good picture of quality of care. A single performance indicator for the entire hospital is unattainable; efforts should focus on performance indicators for specific disorders. There are limitations to the use of performance indicators to compare hospitals; these include correction for case mix, the statistical reliability of the measurements and the validation of performance indicators. Well-considered performance indicators can be used to monitor trends and identify providers that perform below a certain benchmark, but not to rank them.