Regulations instituted by the Department of Health, Education, and Welfare effective in 1976 require skilled nursing facilities (SNF) to provide either a physician serving as medical director, or to have an organized medical staff. This report describes how SNFs responded, and what the effects were on their operations. Descriptive data were obtained: (1) indicating the extent to which SNFs fulfilled the requirement, the methods used, and the characteristics of facilities that were unable to comply; (2) characterizing physician, medical directors and their activities; and (3) identifying and describing arrangements for medical direction. A mail/telephone survey was conducted to provide national descriptive data on how SNFs provide medical direction. Site visits were made to 21 facilities to explore--with the administrator, medical director, and nursing director--the behavioral aspects of the implementation of medical direction. Findings suggest that the vast majority of SNFs have provided some form of medical direction; that there has been limited variation in the arrangements for medical direction; that there are a number of barriers to the implementation of this concept; and that the potential exists for the concept of medical direction to be an effective force in improving patient care. (Author/SF)