The most common adverse events experienced by hospitalized patients are drug related. While numerous studies have described the incidence and types of adverse drug events (ADEs), the actual effect of these events on patient outcomes have only been estimated. The studies that have described the effects of ADEs on patient outcomes have not stratified patients by severity of illness and hospital costs were estimated based on a percent of hospital charges. We designed a study to utilize the resources of our hospital information system to assess the attributable effects of ADEs on hospital length of stay and cost of hospitalization. This approach emphasized the difference between study patients and their matched control patients rather than overall differences between patients with and without ADEs. In addition, we used nursing acuity data to help adjust severity of illness within DRG groups and actual hospital costs were used instead of estimated costs. This study found that while the average length of stay for patients with ADEs was 8.19 days compared to 4.36 days for matched control patients, the attributable difference due to the ADEs was 1.94 days. Similar methods found that patients with ADEs had an average cost of hospitalization of $10,584 compared to $5,350 for those without and the attributable difference due to ADEs was $1,939. This indicates that the 569 ADEs at our hospital during 1992 resulted in an additional 1,104 extra patient days at a cost of $1,103,291.