OBJECTIVE: To describe outpatient antipsychotic medication treatment patterns and estimate the diagnosis-related costs of care associated with treatment of schizophrenic patients in usual care. METHODS: Use of outpatient antipsychotic medications and other health services during 1997 was obtained for 1,356 patients with a diagnosis of schizophrenia in a claims database. We evaluated the treated prevalence of outpatient antipsychotic therapy and continuity of medication usage, and estimated the costs of schizophrenia care, adjusting for multiple covariates. RESULTS: 21.2% of patients diagnosed with schizophrenia received no antipsychotic medication in the outpatient setting for a minimum of 12 months afterward; 19.2% discontinued their initial antipsychotic without subsequent restart of an antipsychotic during the interval; 20.9% experienced multiple treatment episodes of the same antipsychotic; 17.8% received multiple different antipsychotic medications; and 20.9% received continuous antipsychotic medication therapy. Patients receiving multiple antipsychotics incurred significantly higher total diagnosis-related costs (p<0.001) than patients in each of the other medication treatment groups. The average diagnosis-related cost of care for patients receiving multiple antipsychotics was $10,585, $5,692 for patients who discontinued monotherapy without restart, $5,156 for patients with continuous monotherapy, $5,068 for patients with multiple monotherapy treatment episodes, and $2,401 for patients not receiving medication therapy. The proportion of costs for institutional care incurred by patients ranged from 37% for patients receiving continuous medication monotherapy to 77% for patients who either discontinued or never received medication therapy. CONCLUSIONS: A substantial proportion of schizophrenic patients received either no exposure or limited exposure to antipsychotic medications. Patients who received medication monotherapy either continuously or through successive treatment episodes were less costly than patients who received multiple medication therapies or discontinued medication monotherapy. Reductions in institutional costs among patients receiving continuous antipsychotic monotherapy offset costs of these medications.