To better understand the factors that support or inhibit process improvement in a hospital setting, we conducted a study of one hospital’s attempt to implement a health information system (HIS) to reduce errors in medical treatment and manage material flows. Our analysis suggests that critical determinants of success in efforts to improve hospital efficiency include connections among key hospital staff, including doctors, nurses, and pharmacists, as well as patients. Building on these observations, we propose a dynamic model capturing the evolution of the interactions among the “physics” underling hospital operations, information technology (IT), and staff behavior. We show that early success in one phase of process improvement can create unintended feedback in a later phase. We use a system dynamics model to examine losses in performance in these later phases. We then recommend management improvements in both materials and staff utilization and estimate the resultant cost-saving. As part of this analysis we explore opportunities to merge real-time operational data with feedback modeling to provide dynamic tools for hospital administration, risk management, and education and training. We believe that the major gains in HIS use will accompany new information gathering capabilities, as these capabilities result in collections of data that can be used to greatly improve patient safety, hospital operations, and medical decision support. Introduction The need for information technology (IT) implementation in hospital environments has been well documented, yet the challenges to successful implementation, and numerous high-profile failed attempts, have similarly been recorded. To date, the majority of proposed solutions to health care IT integration have focused on solving technology, integration, and operational issues. While important, these approaches fail to take advantage of the new opportunities provided by data collections systems. For example, the emerging HIS environment at a number of Japanese hospitals includes operational bar-code systems, providing increased patient safety with regard to injections. In the process of providing increased safety, the system collects information on every interaction between order, drug, nurse, and patient.