Pharmacotherapy with ACE inhibitors and ß-blockers is now recommended for most CHF patients and offers the potential to reduce morbidity and mortality associated with this disease. OBJECTIVE: The purpose of this study was to evaluate the effectiveness of ß-blocker and ACE inhibitor therapy on the risk of hospitalization and total direct medical expenditures among patients with congestive heart failure enrolled in a managed care organization (MCO). METHODS: Retrospective claims data from an MCO were analyzed for the 1997-1999 period. Subjects were included if they had an ICD-9-CM code for CHF and were continuously eligible for 18 months. Subjects were categorized by whether they were receiving ACE inhibitor, ACE inhibitor + ß-blocker, or neither ('no-therapy'). For each group, an index date was defined based on the initiation of therapy with an ACE inhibitor or ß-blocker and the initial ICD-9-CM CHF claim. The effect of each therapy on the risk of all-cause hospitalization, CHF-related hospitalization, and total direct medical costs during the subsequent 12 months following the index date was analyzed using OLS and logistic regression models. RESULTS: A total of 1903 eligible patients were included. The mean (SD) age was 69.4±12.4 years, 48.8% were male, and the mean (SD) chronic disease score was 5.89±3.78. ACE inhibitor therapy, but not ß-blocker therapy, were associated with a significant decrease (34.7 percent, p<0.0001) in the risk of all-cause hospitalization. Neither therapy was associated with a statistically significant effect on the risk of CHF-related hospitalization. ACE inhibitor and ß-blocker therapies was associated with $2064 and $1185 lower total direct medical costs compared to the 'no-therapy' cohort (p<0.001 for both). CONCLUSIONS: These results are similar to those of randomized trials demonstrating the benefits of ACE inhibitor. The findings for ß-blocker therapies were mixed, potentially due to confounding by indication.