BACKGROUND: Postpartum hospital stays seem likely to remain limited even under new laws which mandate that insurers cover 48-hour hospitalization after uncomplicated delivery. Clinicians, who are increasingly practicing in capitated arrangements, need better information to maximize clinical benefit to mothers and newborns using finite resources. OBJECTIVE AND INTERVENTIONS: This study’s aim was to evaluate the clinical outcomes, patient perceptions, and costs of a revised model of perinatal care services. In this model, a new postpartum care center was established for routine follow-up of newborns within 48 hours after hospital discharge, educational efforts were shifted from the postpartum hospitalization to the prenatal period, and lactation consultant hours were increased. DESIGN AND PARTICIPANTS: Controlled, nonrandomized (double cohort) study that compared mothers and newborns with hospital stays of 48 hours or less during the Baseline Care (preintervention) study period (N = 344) with those under the Revised Care (postintervention) study period (N = 456). SETTING: The Hayward, California, medical center of Kaiser Permanente, a nonprofit health maintenance organization. DATA COLLECTION: Telephone interviews were attempted with all mothers 3 weeks after delivery. Data on rehospitalizations, emergency department (ED) and clinic visits, and costs during the first 14 postpartum days were collected from computerized databases and chart review. OUTCOME MEASURES: The combined clinical outcome was defined as any undesirable health event, including rehospitalization, an ED visit, or an urgent clinic visit by either the mother or newborn within the first 14 days postpartum, or breastfeeding discontinuation within the first 21 days postpartum. Maternal satisfaction and costs were also studied. RESULTS: Of 876 attempted interviews, 800 were completed (91%). Analyses were adjusted for age, race, education, parity, breastfeeding experience, and other relevant variables. Among the interviewed mother-newborn pairs, 45% in the Revised Care group experienced the combined clinical outcome, compared with 52% in the Baseline Care group. Newborns in the Revised Care group (29%) were significantly less likely to make urgent clinic visits during the first 14 days of life than those in the Baseline Care group (36%). There were no differences between groups in newborn ED visits or rehospitalizations, maternal clinical outcomes, or breastfeeding continuation. Mothers in the Revised Care group expressed higher satisfaction with the newborn’s care, the amount of information they received about newborn care and breastfeeding, and the amount of help they received with breastfeeding. Planned hospital care, planned follow-up visits, and unplanned care costs decreased by $149 per delivery, while the new prenatal class and increased lactation consultant services cost $58 per delivery, for an estimated overall reduction in cost. CONCLUSIONS: We conclude that the revised model of perinatal care in this health maintenance organization medical center improved clinical outcomes and maternal satisfaction for low-risk mothers and newborns without increasing costs.