Abstract: A fundamental change is taking place in the use of outcomes data as the country moves from indemnity-based health insurance to managed care. For traditional indemnity plans, insurers functioned primarily as administrators of policyholder funds, providing two essential value-added services: the payment of claims and the assessment of financial risk. Until recently, minimal efforts were made to reduce risk through managing the delivery of health care. At most, some attention was paid to the effectiveness of new tests and treatments, usually limited to procedures that are very questionable and expensive, and those that border on quackery. Outcomes research was of minor importance to indemnity insurers and their customers. For strong form-managed care plans, such as health maintenance organizations, the situation is very different. The value-added service of managed care organizations (MCOs) is the management of medical care, and these plans compete based on their ability to control the rate of cost increases and improve the quality of care. In this envi