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OBJECTIVE: The purpose of this study was to assess use of a critical pathway designed to manage community-acquired pneumonia more efficiently than its management with conventional therapy. METHODS: Economic outcomes were assessed in conjunction with a cluster-design, randomized, controlled trial. Nineteen participating Canadian hospitals were randomized to implement the critical pathway (n = 9) or conventional therapy (n = 10). The critical pathway included a clinical prediction rule to guide the admission decision, treatment with levofloxacin, and practice guidelines. Patient data on medical resource use, lost productivity, and quality of life were collected prospectively for > or =6 weeks after treatment. Costs were calculated from the government, health care system, and societal perspectives, with imputation of missing outpatient costs and the costs of lost productivity when necessary. Bootstrapping was used to identify 95% CIs for the total cost per patient. RESULTS: The analysis included all eligible patients in the critical pathway (n = 716) and conventional therapy (n = 1027) arms. There were fewer hospital admissions in the critical pathway arm than in the conventional therapy arm, both overall (46.5% vs 62.2%; P = 0.01) and in low-risk patients (33.2% vs 46.8%; P < 0.001). Compared with conventional therapy, hospitals in the critical pathway arm had 1.6 fewer bed days per patient managed (P = 0.05) and used fewer inpatient medical resources. The 2 study arms had similar outpatient, readmission, and lost-productivity costs, and similar quality-of-life outcomes. The critical pathway produced cost savings from all 3 perspectives that ranged from $457 to $994 per patient. CONCLUSIONS: The critical pathway employing levofloxacin resulted in cost savings compared with conventional therapy and did not compromise health outcomes