Hospital for special surgery was the primary funding source for this study. Total hip arthroplasty (THA) has become a commonly performed procedure in modern orthopedics and as such represents a major consumer of healthcare resources. Today' managed care environment has forced healthcare providers to justify their methods of care through documentation of outcomes and provide evidence that clients achieve functional-based milestones in an effective and efficient manner. This project analyzed the outcomes data from patients who underwent unilateral hip arthroplasty during the period 1993-1997 so as to determine the change over time in functional milestone parameters and evaluate the potential impact of change in hospital operations and the clinical pathway of care on this patient population. Using a valid and reliable Functional Milestone Assessment Form, data were prospectively gathered from the more than 5300 patients who underwent unilateral THA at our institution between 1993 and 1997. The form records the postoperative day on which each patient achieves functional milestones (transfers, ambulation with assistive devices, and stair negotiation) as well as basic demographic data, surgical information, length of stay, and discharge disposition. The mean length of stay and number of postoperative days needed to achieve each milestone was calculated on a yearly basis. The percentages of patients achieving each milestone by hospital discharge and/or requiring admission to an inpatient rehabilitation facility after discharge were also calculated. Differences from year to year were examined and student t test was used to compare the data for the 1993-1997 study period. There has been a steady and statistically significant (P < .005) decrease in length of stay and the amount of time required for patients who have undergone THA to achieve independence in basic functional milestones. The overall percentage of patients achieving each milestone has decreased over the last 5 years as may be expected with the more than 3-day decrease in length of stay. The number of patients transferred to inpatient rehabilitation facilities has roughly doubled since 1995. Factors unrelated to functional status (ie, living alone) were often the primary reason for a patient's admission to an inpatient rehabilitation facility, making inclusion of outcomes data from these patients misleading. When data from these patients were excluded, there was essentially no difference in the percentages of patients achieving independent milestones. During the study time frame, our facility instituted 3 major changes in the delivery of care for patients who underwent a THA. In 1994, the protocol was changed to being mobilize on postoperative day 1 rather than on postoperative day 2. Also in 1994, twice daily sessions conducted by a "physical therapist/assistant/mobility technician" team were initiated. In 1996, we adopted a clinical pathway that outlined a 5-day length of stay. Prior to 1996, the expected length of stay was 6 to 7 days. The greatest improvement in days required to achieve functional milestone goals and discharge occurred in the 1993-1994 and 1995-1996 intervals. The differences in the 1994-1995 and 1996-1997 periods, while statistically significant, were generally less than 5 days and thus not clinically or fiscally significant. Therefore, it is likely that the changes in hospital operations, staff mix, and clinical pathway of care were at least partially responsible for the improvement in length of stay and achievement of functional milestones. In addition, these changes contributed to the reduction in hospital inpatient therapy staff by 1.5 full-time equivalents and savings of $232,350 to the institution. Accelerating the rate of functional progression has allowed many people who undergo THA to achieve functional milestones necessary for independence within a shorter length of stay. In addition, alteration of staffing patterns associated with this change in clinical pathway of care resulted in substantial financial savings to the institution. This shortened length of stay was not sufficient however for a segment of the THA population to achieve more advanced milestones and thus is not without negative impact in the short term on the functional status of this patient population as a whole. The ability of healthcare providers to analyze outcomes data and utilize that information to make appropriate changes in the delivery of care assists patient consumers to receive maximum benefit within the managed healthcare system and is crucial to institutions' survival in the current fiscal environment.