Magnetic resonance imaging of the knee is greater than 90% accurate in detecting intraarticular disease when performed and interpreted by musculoskeletal magnetic resonance imaging specialists in specialized medical centers. However, independent imaging institutions often offer less expensive services to health insurers. We wondered if the magnetic resonance imaging performed in our community is of equivalent quality and accuracy. We studied a homogenous group of healthy, young, and fit military recruits to represent a cross section of our country's population. We analyzed all knee magnetic resonance images of soldiers who subsequently had primary arthroscopic knee surgery within a 3-month period from 1997-1998. The results were compared with surgical findings of four structures: medial meniscus, lateral meniscus, anterior cruciate ligament, and articular cartilage. Of the 1185 arthroscopies and 633 magnetic resonance images of the knee performed in 14 institutions, 139 paired magnetic resonance imaging arthroscopic reports met our inclusion criteria. The results showed a false positive rate of 65% for the medial meniscus, 43% for the lateral meniscus, 47.2% for the anterior cruciate ligament, and 41.7% for articular cartilage disease when compared with surgical findings. Accuracy rates were 52%, 82%, 80%, and 77%, respectively. Thirty-seven percent of the operations supported by a significant disorder on magnetic resonance imaging were unjustified. Our findings highlight the consequences that may occur when basing medical care on cost rather than quality of care.