Public hospitals that are directly managed by government perform poorly in many developing countries. Approaches to improving them through internal managerial reforms have failed, and effective alternatives are much needed. Policymakers are considering reforms through public-private partnerships (PPPs)--a promising but so far unevaluated approach. We present results of a successful reform in São Paulo, Brazil. The PPP model gave facility managers latitude to manage human resources--a factor critical to success. Given the prevalence of direct management of public hospitals in developing countries, the São Paulo experience has implications for policymakers seeking to improve hospital performance.