Administrative data result from administering health care delivery, enrolling members into health insurance plans, and reimbursing for services. The primary producers of administrative data are the federal government, state governments, and private health care insurers. Although the clinical content of administrative data includes only the demographic characteristics and diagnoses of patients and codes for procedures, these data are often used to evaluate the quality of health care. Administrative data are readily available, are inexpensive to acquire, are computer readable, and typically encompass large populations. They have identified startling practice variations across small geographic areas and supported research about outcomes of care. Many hospital report cards (which compare patient mortality rates) and physician profiles (which compare resource consumption) are derived from administrative data. However, gaps in clinical information and the billing context compromise the ability to derive valid quality appraisals from administrative data. With some exceptions, administrative data allow limited insight into the quality of processes of care, errors of omission or commission, and the appropriateness of care. In addition, questions about the accuracy and completeness of administrative data abound. Current administrative data are probably most useful as screening tools that highlight areas in which quality should be investigated in greater depth. The growing availability of electronic clinical information will change the nature of administrative data in the future, enhancing opportunities for quality measurement.