Improving patient outcomes while controlling the costs of care requires a partnership between clinical researchers and hospital management. To this end, Strong Memorial Hospital in Rochester, New York, dedicated hospital operating funds to a program of small grants designed to align the patient care and academic interests of clinicians with the goals of efficient hospital management. The grants gave clinicians an opportunity to test the efficacy of specific patient care maneuvers. These studies resulted in improved guidelines for the use of diagnostic and therapeutic modalities, new technology, and length of hospitalization. Annual marginal cost savings from implementing the first-year study results are projected to be $587,255, an 8 to 1 return on the first year's expenses. The authors conclude that a hospital-funded applied research program encourages those delivering patient care to identify inefficiencies and introduce change while ensuring quality patient care. This joint faculty-management effort can augment the hospital's quality-assurance, utilization management, and technology assessment programs while advancing the scholarship of faculty members.