: The purpose of this study was to examine and assess the impact of knowledge management on innovation, strategy implementation and organizational performance. Studies conducted on Lavalette Hospital in Malang, considering the health services industry should be responsive and able to face of environmental change. Respondents were drawn from all employees RS Lavalette, this study taken using direct method with instruments questionnaire survey. 176 questionnaires distributed and 168 questionnaires returned. Based on the analysis of Partial Least Square (PLS smart 2.0), studies show that knowledge management has impact on innovation and implementation of the strategy, but innovation does not affect the performance of the organization. Interesting results from this study is evidence that the direct impact of knowledge management on organizational performance is worth less than its impact on organizational performance is mediated by the implementation of strategy. Implications of the results of this study suggest and reinforce that knowledge management is not a major determinant of the success of the organization's performance, but its presence is an important input from the implementation of the strategy, in order to improve organizational performance.