Community-acquired pneumonia (CAP) is a frequent cause of hospital admission and death among elderly patients, but there is little information on age- and sex-specific incidence, patterns of care (intensive care unit admission and mechanical ventilation), resource use (length of stay and hospital costs), and outcome (mortality). We conducted an observational cohort study of all Medicare recipients, aged 65 years or older, hospitalized in nonfederal U.S. hospitals in 1997, who met ICD-9-CM-based criteria for CAP. We identified 623,718 hospital admissions for CAP (18.3 per 1,000 population > or = 65 years), of which 26,476 (4.3%) were from nursing homes and of which 66,045 (10.6%) died. The incidence rose five-fold and mortality doubled as age increased from 65-69 to older than 90 years. Men had a higher mortality, both unadjusted (odds ratio [OR]: 1.21 [95% CI: 1.19-1.23]) and adjusted for age, location before admission, underlying comorbidity, and microbiologic etiology (OR: 1.15 [95% CI: 1.13-1.17]). Mean hospital length of stay and costs per hospital admission were 7.6 days and $6,949. For those admitted to the intensive care unit (22.4%) and for those receiving mechanical ventilation (7.2%), mean length of stay and costs were 11.3 days and $14,294, and 15.7 days and $23,961, respectively. Overall hospital costs were $4.4 billion (6.3% of the expenditure in the elderly for acute hospital care), of which $2.1 billion was incurred by cases managed in intensive care units. We conclude that in the hospitalized elderly, CAP is a common and frequently fatal disease that often requires intensive care unit admission and mechanical ventilation and consumes considerable health care resources. The sex differences are of concern and require further investigation.