Heart failure affects more than 2 million Americans, and about 400,000 new cases are diagnosed each year. The direct economic cost is over $10 billion/year. About 75% of this cost is spent on hospitalization, and almost 20% on nursing home care. Drugs such as angiotensin-converting enzyme (ACE) inhibitors reduce mortality and hospitalization and are thus very cost effective in the management of heart failure. Cost-effective strategies should focus on keeping patients out of the hospital. Additional savings can be obtained by more appropriate utilization of tests.