Data from the Manitoba health insurance program were used to analyse the patterns of outpatient surgery in patients aged 20 years or older in the eight largest hospitals in the province (all with at least 125 beds) in 1983-84. With the exception of tooth extraction, only procedures that were not done more than 86% of the time as inpatient or outpatient procedures were considered. Large differences between the hospitals and between physicians within each hospital were found in the rates of outpatient surgery, even after adjustment for patient characteristics and differences in case mix. If the standard of the hospital with the highest rate of outpatient surgery were followed by the seven other hospitals, up to 17.5 inpatient beds could be closed or freed. However, the potential savings from substituting outpatient for inpatient procedures must be realistically appraised. The appropriate place for monitoring the use of inpatient and outpatient surgery may be the individual hospital, particularly those with high occupancy rates and a large demand for inpatient beds.