Background - Hospital admissions due to adverse drug events (ADEs) are expensive, and many may be preventable, yet few institutions have ongoing surveillance for these events. Objective - To evaluate the use of a computer-based ADE monitor to identify admissions due to ADEs and to measure the associated costs. Design - Prospective cohort study in one tertiary care hospital. Participants - All patients admitted to nine medical and surgical units in a tertiary care hospital over an 8-month period. Main outcome measure - Admissions to the hospital due to an adverse drug event. Methods - A computer-based monitoring program generated alerts suggesting that an ADE might be present. A trained reviewer then evaluated the record. Results - Among the 3238 admissions, 76 (2.3%, 1.4% after adjusting for sampling) were found to be caused by an ADE. Of these ADEs, 78% were severe and 28% were preventable. Estimated costs were $16,177 per ADE, and $10,375 per preventable ADE; annualized costs to the hospital were $6.3 million per year for all ADEs, and $1.2 million for preventable ADEs. Conclusions - Many admissions were caused by ADEs, although our point estimate undoubtedly represents: a lower bound. These events were mostly severe, often preventable, and expensive. The computer-based monitoring system represents a practical approach for identifying ADEs that occur in outpatients and cause admission to the hospital. Copyright (C) 2001 John Wiley & Sons, Ltd.