OBJECTIVE Determine the utility of nocturnal oximetry as a screening tool for sleep apnea-hypopnea syndrome (SAHS) compared with polysomnography (PSG). METHODS Cost-effectiveness analysis based on retrospective review of overnight sleep studies. METHODS United States Air Force tertiary teaching hospital. METHODS One hundred consecutive patients evaluated for SAHS by overnight sleep study. METHODS Participants underwent PSG and oximetry on the same night. Patients with obstructive sleep apnea had a continuous positive airway pressure trial. METHODS Oximetry was abnormal when > or =10 events per hour occurred. Two criteria were evaluated. A "deep" pattern of > 4% change in oxyhemoglobin saturation to < or =90%, and a "fluctuating" pattern of repetitive short-duration fluctuations in saturation. The diagnostic accuracy of both methods was compared with PSG. Cost-effectiveness of screening oximetry was compared with PSG alone and use of split-night studies. RESULTS The fluctuating pattern had a greater sensitivity and negative predictive value, while the deep pattern had a greater specificity and positive predictive value. Oximetry screening using the fluctuating pattern was not as sensitive as PSG for detecting patients with mild disease; 17 of 28 patients (61%) with normal oximetry results had treatable conditions detected by PSG. Cost analysis showed that screening oximetry would save $4,290/100 patients but with considerable loss of diagnostic accuracy. CONCLUSIONS Screening oximetry is not cost-effective because of poor diagnostic accuracy despite increased sensitivity using the fluctuating pattern. Greater savings, without loss of diagnostic accuracy, may be achieved through increased utilization of split-night PSGs.