The purpose of this research was to provide insight into the use of existing administrative data and to identify changes that could be made to improve broad-based use of administrative data. Data were collected on patients hospitalized with pneumonia at a 715 bed hospital in North Carolina in 1996-1997. Patients were selected from administrative databases via diagnosis and charge codes. Outcome variables were length of stay and total hospital charges. Explanatory variables were age, sex, race, insurance type, season of year, admission source (emergency department or other), comorbidity score, care path designation, physician specialty and teaching appointment. These data were collected from administrative data and then from a limited chart review to correct the administrative data. We found no significant differences in economic outcomes between the administrative data and the corrected administrative data. Administrative data appear to be a reliable and cost-effective data source for quality assessment.