Public hospitals that are directly managed by government perform poorly inmany developing countries. Approaches to improving them through internal managerial re-forms have failed, and effective alternatives are much needed. Policymakers are consider-ing reforms through public-private partnerships (PPPs)—a promising but so far unevaluatedapproach. We present results of a successful reform in São Paulo, Brazil. The PPP modelgave facility managers latitude to manage human resources—a factor critical to success.Given the prevalence of direct management of public hospitals in developing countries, theSão Paulo experience has implications for policymakers seeking to improve hospital perfor-mance. [Health Affairs28, no. 4 (2009): 1114–1126; 10.1377/hlthaff.28.4.1114]