Modern imaging techniques in medicine have revolutionized the study of anatomy and physiology in man. A central factor in the success and increasingly widespread application of imaging-based approaches in clinical and basic research has been the emergence of sophisticated computational methods for extracting salient information from image data. The utility of image processing has prompted the development of numerous algorithms for medical data, but these have largely remained research tools and few have been incorporated into a clinical workflow. A primary cause of this poor track record is the lack of validation of these methods. A workshop was held at this year's Image Processing Conference to discuss and stimulate developments in performance characterization research for medical image processing algorithms. This report presents highlights from the workshop presentations and from the panel discussion with the audience.