OBJECTIVE This study was designed to determine if an accelerated treatment protocol administered to acute asthmatics presenting to a Hospital Emergency Department Observation Unit (EDOU) can offset the need for inpatient admissions and reduce total cost per episode of care without sacrificing patient quality of life. METHODS The authors used a prospective randomized controlled trial comparing postintervention patient quality of life for EDOU care versus standard inpatient care as measured by the standardized Medical Outcomes Study (MOS) SF-36 instrument. Other measures reported include: clinical status as measured by peak flow rates, total cost per treatment arm using microcosting techniques, and relapse-free survival 8 weeks after treatment. Eligible patients (n = 113) were assigned randomly to an EDOU or inpatient care from a consecutive sample of 250 acute asthmatic patients presenting to an urban hospital emergency department who could not resolve their acute asthma exacerbation after 3 hours of emergency department therapy. RESULTS Patients assigned to the EDOU had lower mean costs of treatment (EDOU = $1,202 versus Hospital Inpatient = $2,247) and higher quality of life outcomes after intervention in five of eight domains measured by the MOS SF-36: Physical Functioning, Role Functioning-Emotional, Social Functioning, Mental Health, and Vitality. No differences were found in clinical outcomes as measured by peak flow rates or postintervention relapse-free survival. Univariate comparative findings were re-examined and confirmed through multivariable analysis when baseline SF-36 scores and postintervention peak expiratory flow rates clinical status were used as covariates. CONCLUSIONS The study showed that the EDOU was a lower cost and more effective treatment alternative for a refractory asthmatic population presenting to the Emergency Department. Several baseline MOS SF-36 domains proved useful in predicting or validating posttreatment clinical status, relapse, and total costs of care. Outcome SF-36 domain scores were also useful in identifying patients with the most favorable clinical, cost, and relapse rate outcomes at the study endpoint.