Stimulated by a variety of external pressures, managerial innovation is likely to become more common in health care organizations. Relatively little is known, however, about the phenomenon. This paper develops a framework for the analysis of managerial innovation in health care organizations, based on the premise that control is at the heart of effective managerial practice. Physician control over the production process in health care is likely to be increasingly challenged, partially as a consequence of the ascendency of managerial ideology. Opportunities for managerial innovation will be created, but are likely to be successful only to the extent that physician expertise is incorporated into rather than excluded from the resulting changes.