During the 1990s, cost reduction programs were developed to decrease the hospital cost of total knee arthroplasty. The purpose of this study was to evaluate the impact of hospital cost reduction programs for total knee arthroplasty on patient outcome at our hospital. We evaluated 159 patients who had undergone unilateral primary total knee arthroplasty for the treatment of osteoarthritis at the Lahey Clinic. The results of fifty-six knee replacements performed in 1992 without a clinical pathway or a knee-implant standardization program (the control group) were compared with the results of 103 knee replacements performed in 1995 with a clinical pathway and a knee-implant standardization program (the study group). Before the operation, the two patient populations were similar in terms of age, pain score on a visual analog scale, and clinical knee scores; the groups were also similar with regard to the surgical approach and the time in the operating room. The minimum duration of follow-up was eight years for the control group and five years for the study group. All patients in both groups had excellent relief of pain and improvement in function. There were no differences in clinical outcome between the patient groups. The rate of patient satisfaction was 98% in the control group and 99% in the study group. Implementation of the clinical pathway was associated with a reduction in the average length of the stay in the hospital from 6.79 days in 1992 to 4.16 days in 1995. Implementation of the knee-implant standardization program was associated with increased use of all-polyethylene tibial components in 1995. Hospital cost adjusted for medical inflation was reduced 19% with the implementation of the clinical pathway and the knee-implant standardization program. The clinical pathway and the knee-implant standardization program reduced resource utilization and hospital cost for total knee arthroplasty without affecting short-term patient outcome in our hospital. Orthopaedic surgeons should carefully evaluate cost reduction programs, which may affect their patients, in order to maintain high-quality orthopaedic care and consistently successful patient outcomes.