The purpose of this study was to determine the degree of manpower complementarity and substitutability of different qualities of labor, the causes of manpower substitution, and the implications of such substitution for the quality of hospital services. The New York City voluntary and municipal hospital systems were chosen for the analysis because the two systems operated under different incentives and constraints. Statistical data on the hospital skill level, size, case mix, case severity, technology, neighborhood characteristics, skilled wage rates, skilled workload, and costs per patient day were analyzed for both hospitals in 1955 and 1965. Various tests of the degree of manpower complementarity and substitutability were developed and applied in both hospital systems. The relationship between skilled labor shortages and manpower substitution was examined and the statistical relationship between the hospital skill level and other variables was tested for 1965. The relationship between hospital skill level and hospital quality was examined. (Author)