OBJECTIVES: To evaluate the effect of a quality improvement intervention that provided financial incentives to physicians to encourage adoption of best practices, coupled with organizational support to improve care management.  The intervention, implemented at two pilot sites in Washington State, was aimed at reducing work disability for patients with occupational injuries or illnesses treated within the workers’ compensation system.  METHODS: At each pilot site, a Center for Occupational Health and Education (COHE) was established to recruit physicians for the pilot and to implement the intervention.  We conducted a prospective non-randomized intervention study, with a non-equivalent comparison group, using difference-in-difference models.  The intervention group included patients (31,520) treated from July 2004 through June 2007 by COHE physicians (n > 300).  The comparison group included patients (40,176) treated by non-COHE physicians practicing in the pilot target areas.  The baseline (pre-intervention) period was specified as July 2001 to June 2003 and included 33,910 patients treated by COHE and non-COHE physicians.  We used logistic regression and generalized linear models to analyze four outcomes at one year following injury: off work and on disability, disability days, and disability costs and medical costs per claim. RESULTS: COHE patients were less likely to be off work and on disability at one year post injury (OR = .79, P = 0.003).  The COHE was associated with a statistically significant (p < .01) reduction in disability days (16.5%) and disability costs (23.7%), and with  a non-signific0ant (p = 0.13) reduction of 6.7% in medical costs.  Patients treated by COHE physicians who more often adopted occupational health best practices had 57% fewer disability days (p = 0.001) compared with patients treated by COHE physicians who less frequently adopted best practices. CONCLUSIONS: Physician financial incentives, coupled with care management support, can improve outcomes and reduce costs for patients receiving occupational health care.