OBJECTIVE Quality measures may be associated with improved outcomes for two reasons. First, measured activities may directly improve care. Second, success on these measures may be a marker for other unmeasured aspects of high quality care. Our objective is to test the contribution of both possible effects. METHODS 2004 Medicare data on hospital performance from Hospital Compare and risk-adjusted mortality rates from Medicare Part A claims. METHODS We studied 3,657 acute care U.S. hospitals and compared observed differences in condition-specific hospital mortality rates based on hospital performance with expected differences in mortality from the clinical studies underlying the measures. RESULTS Differences in observed mortality rates across U.S. hospitals are larger than what would be expected if these differences were due only to the direct effects of delivering measured care. CONCLUSIONS Performance measures reflect care processes that both improve care directly and are also markers of elements of health care quality that are otherwise unmeasured. This finding suggests that process measures capture important information about care that is not directly measured, and that these unmeasured effects are in general larger than the measured effects.