To test the feasibility of defining episodes of care as a cost-effectiveness measure, a pilot study was carried out in conjunction with an ongoing quality assessment program which involved abstracting prospective data from charts of patients treated for hypertension in the Primary Care Clinic of Hahnemann Medical College and Hospital. For comparison, data were abstracted retrospectively on hypertensive patients treated by faculty general internists in a fee-for-service private practice. The 12-month course of each patient was divided into controlled and uncontrolled episodes for which visit frequency rate and mean laboratory test utilization was calculated. Patient cost for each type of episode in each setting was calculated using standard charges. Results indicate that the episode definition is feasible and provides a measure for comparing the cost-effectiveness of different delivery systems treating the same health care problem. Factors omitted from the study that could affect cost-effectiveness are also discussed.