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Managed care has transformed the health care environment that residents encounter on completion of their training. Unfortunately, residency education has not kept pace with changes in the field, leaving graduates inadequately prepared. The authors identify necessary changes in the residency training tasks of instilling values, imparting required knowledge, building core skills, selecting appropriate training sites, and offering a diversity of instructors and supervisors. They also discuss the obstacles that have impeded the evolution of academic clinical services and clinical training. They suggest strategies of change that may lead to more relevant educational programs that provide residents with a balanced perspective on the strengths and weaknesses of both traditional and contemporary approaches to delivering care.