A comprehensive safety and managed care initiative was instituted in 1991 at a large self-insured medical center in an effort to reduce workers' compensation costs. It features an on-site case management team, a preferred provider organization, and safety engineering efforts and ergonomic controls used proactively to aggressively identify and abate workplace hazards. Two worker populations were followed up longitudinally for three years before and after the initiative. Costs incurred by each cohort were compared. A 50% reduction in total expenditures was seen in the managed care cohort. The hospital component of the system saw a decrease in compensation of 62% for temporary total disability and 38% for permanent partial disability. Medical expenditures decreased 50%. Dramatic reductions in costs are achievable, without compromising quality of care, when managed care principles and safety efforts are emphasized.