Both the federal government and insurors are looking for ways to trim healthcare expenditures. Teaching hospitals have consistently been shown to have higher costs for patient care even when adjusted for patient casemix. These higher cosrts are primarily due to the costs of medical education and a style of practice that includes more captial intensive facilities and resources. The goal of this study is to determine whether there are other benefits to teaching hospitals besides medical education. Are the outcomes of patient care better in teaching hospitals? At what additional cost? Positive outcomes would help justify additional costs to society. This project will determine the independent effects of hospital teaching status on the quality and cost of care for ten medical or surgical tracer conditions within the Medicare population. All hospital patients with a tracer diagnosis during 1984 and 1985 will be selected for the study from over 1 million cases in a 5 percent Medicare sample. Risk adjustments will be made for 8 comorbidities as well as other patient variables. Provier characteristics will be included. Quality of care will be measured by time-to-death and time-to related-readmission during a 25 month study period. Costs for inpatient, outpatient, other ambulatory and physician services will be measured. Event history analysis using Cox proportional hazards model will be used to estimate the size and direction of the effect of teaching status on the outcome measures. Multiple regression analysis will determine the effects of teaching status on the costs of care. This study will make a unique contribution to our knowledge of the healthcare field. The use of a large national data base, mortaility subsequent to discharge, and both inpatient and outpatient costs will answer more questions about teaching hospitals than previous studies. Regression for longitudinal data will maximize information about the effects. The results will be generalizable to other population groups and the methods can be applied to other questions.