Reporting requirements and financial incentives have led to an increased focus on hospital quality. Several websites, including Hospital Compare, make hospital quality data readily available to the public. Because public reporting programs measure hospital performance using averages or rankings of observed quality scores, this study posits that they may unfairly penalize hospitals with fewer resources. Using data on hospital capital, labor, and technology as well as organizational characteristics and the market environment, investigators determined the gap between the best possible performance a hospital might achieve on quality and safety measures and its actual performance on those measures as publicly reported by the Centers for Medicare and Medicaid Services. Most hospitals in the study had more than a 10% gap between their estimated best possible performance and their actual performance on the metrics. Important predictors of gaps included payer mix, nurse staffing, size, case mix index, accreditation, and teaching hospital status. This study poses interesting policy implications and raises the question whether hospitals should be compared and rewarded based on their observed performance (as they are now) or in a manner that takes their individual resources and characteristics into account. A past WebM&M commentary discussed the unintended consequences of the public reporting of hospital quality.