We compared rates of hospital use and mortality in fiscal year 1985 among Medicare enrollees in Boston and New Haven, Connecticut. Adjusted rates of discharge, readmission, length of stay, and reimbursement were 47, 29, 15, and 79 percent higher, respectively, in Boston; 40 percent of Boston's deaths occurred in hospitals as compared with 32 percent of New Haven's. High-variation medical conditions (those for which there is little consensus about the need for hospitalization) accounted for most of these differences. By contrast, discharge rates for low-variation medical conditions (which tend to reflect the incidence of disease) were similar. Inpatient case-fatality rates were lower in Boston than in New Haven (RR = 0.85; 95 percent confidence interval, 0.78 to 0.92), but when all deaths (regardless of place of death) were measured, the mortality rates in Boston and New Haven were nearly identical (RR = 0.99; 95 percent confidence interval, 0.93 to 1.05). We conclude that the lower rate of hospital use by Medicare enrollees in New Haven was not associated with a higher overall mortality rate. Population-based as well as hospital-based statistics are needed to evaluate differences in hospital mortality rates for high-variation medical conditions.