Two annual cost-containment educational programs, featuring involvement of respected senior physicians, lectures, comparative feedback, chart reviews, and small group discussions, were designed to reduce interns' generated costs in a private and a VA university hospital affiliated with Northwestern University Medical School. To evaluate the impact of this randomized educational intervention, hospital data on inpatient charges and length of stay (LOS) were collected for 12 common medical diagnoses and adjusted by the Severity of Illness Index. Interns who were randomized to the program were found to have significantly lower per patient costs and LOS than control group interns at both hospitals. These reductions in resource use and LOS were not associated with differences in patients' residual impairment on discharge, the incidence of inpatient complications, or the percentage of deaths and readmissions within 30 days. Our results suggest that the current hospital cost-containment environment may be far more conducive to physician cost-containment education than indicated by the earlier literature.