Analysis of Medicare data on quality and costs of care for acute myocardial infarction (AMI), hip fracture, and colorectal cancer (with resection) reveals substantial variations in one-year, risk-adjusted mortality rates following the initial hospital admission and in resource use over the course of a year. The analysis used two indices to identify hospital regions in the top-performance quartile on both quality (annual mortality) and costs. If the United States as a whole were able to reach the level of higher survival and lower cost achieved by regions in the top quartile for both indices, the nation could save 8,400 lives and reduce annual Medicare spending by $900 million for the three conditions.