This paper presents preliminary quality and utilization data from a hospitalist system that is being implemented at Kaiser Permanente, a large health maintenance organization with 16 hospitals in northern California. Hospitalist programs, which are staffed by clinicians highly skilled in caring for inpatients, are being launched with the aim of delivering high-quality, efficient medical care in an increasingly competitive health care delivery environment. This paper also describes, in some detail, the process of implementation at one hospital. Challenges to implementation included 1) overcoming the reluctance of clinic physicians to relinquish inpatient care responsibilities, 2) developing sustainable work schedules, 3) creating effective channels of communication between staff in inpatient and outpatient settings, and 4) designing appropriate compensation scales for hospitalists. Mean length of stay, patient-day rates, admission rates, consultation request rates, costs, and readmission rates were examined for patients discharged from adult medicine services at all 16 hospitals between 1 January 1994 and 30 June 1997. These preliminary resource utilization data seem promising, but further analysis is needed to assess how hospitalist programs may affect clinical quality of care, costs, and patient and provider satisfaction.