A family practice residency program in a California public teaching hospital was faced with a financial crisis that threatened its elimination. Hospital officials and medical leaders developed a strategy that resulted in (1) personnel reductions focused principally on hospital overhead departments, (2) reductions in faculty teaching fees, (3) increased resident and faculty productivity, (4) increased patient access to ambulatory areas, (5) decreased utilization of laboratory, radiology, respiratory, physical therapy, pharmacy, and cardiology services, and (6) more favorable contracts with providers for patient care services. The hospital met its financial objectives primarily as a result of collaborative efforts of the hospital management team and a committed faculty vested in the success of the institution.