1. Nurses in this study often made diagnoses pertaining to physiological or physical problems rather than psychosocial problems. One diagnostic category, "impaired home maintenance management," was consistently used incorrectly, suggesting a need for careful clinical training of nursing staff in diagnostic reasoning. 2. Patients who had a greater number of nursing diagnoses had greater improvements in function during the hospital stay. One explanation is that more nursing diagnoses may lead to more independent nursing actions, resulting in improvements in functional abilities. 3. Functional status on admission measured by the Katz ADL was the most powerful predictor of functional status at discharge. The scale can readily be used by nurses to document basic functioning and to quickly identify patients needing or coordinated discharge planning. 4. Institutionalized had a higher mean number of nursing diagnoses than those who were discharged to their own homes. The most powerful predictor of institutionalization was the Katz ADL score.