Medical records of babies born in a hospital-based birthing center were reviewed to determine whether a birthing center alternative to traditional hospital care of the newborn is safe and cost-effective. A cohort of 123 hospital-based birthing center low-risk deliveries was compared to 100 control low-risk deliveries born in the traditional setting at the medical center during the same time period. Morbidity was assessed using the Hollister Classification as reference and was based on treatment need. The analysis of the babies' status at birth, 24 hours, and 72 hours revealed no difference in immediate morbidity. Cost of hospitalization was reduced by $340.00 per cohort baby. These data suggest that this alternative can be safe and cost-effective. This study applies only to hospital-based birthing centers, because the safety of free-standing birthing centers has not been established and because screening for low risk can not eliminate morbidity.