Background: Hospitals are under increasing pressure to share indicator-based performance information. These indicators can also serve as a means to promote quality improvement and boost hospital performance. Our aim was to explore hospitals' use of performance indicators for internal quality management activities. Methods: We conducted a qualitative interview study among 72 health professionals and quality managers in 14 acute care hospitals in The Netherlands. Concentrating on orthopaedic and oncology departments, our goal was to gain insight into data collection and use of performance indicators for two conditions: knee and hip replacement surgery and breast cancer surgery. The semi-structured interviews were recorded and summarised. Based on the data, themes were synthesised and the analyses were executed systematically by two analysts independently. The findings were validated through comparison. Results: The hospitals we investigated collect data for performance indicators in different ways. Similarly, these hospitals have different ways of using such data to support their quality management, while some do not seem to use the data for this purpose at all. Factors like 'linking pin champions', pro-active quality managers and engaged medical specialists seem to make a difference. In addition, a comprehensive hospital data infrastructure with electronic patient records and robust data collection software appears to be a prerequisite to produce reliable external performance indicators for internal quality improvement. Conclusions: Hospitals often fail to use performance indicators as a means to support internal quality management. Such data, then, are not used to its full potential. Hospitals are recommended to focus their human resource policy on 'linking pin champions', the engagement of professionals and a pro-active quality manager, and to invest in a comprehensive data infrastructure. Furthermore, the differences in data collection processes between Dutch hospitals make it difficult to draw comparisons between outcomes of performance indicators.