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Objective: To determine the direct medical costs of treating lower respiratory tract infections (LRTIs) in a managed care organization (MCO)., Study Design: Retrospective analysis of a regional MCO identifying adults diagnosed with acute exacerbation of chronic bronchitis (AECB) or community- acquired pneumonia (CAP)., Methods: A claims database examination of International Classification of Diseases, Ninth Revision, Clinical Modification codes was conducted to identify adults receiving initial outpatient care for an LRTI during 2005-2006. Medical record review then was conducted to verify clinical diagnosis of AECB or CAP. Clinical and demographic data were collected. Outpatient office and clinic visits, hospitalization, and radiology, pathology, and pharmacy records were used to determine treatment costs. Treatment failure was determined by use of a second antibiotic course, follow-up emergency room presentation, or hospitalization for LRTI within 28 days of the index visit. The primary outcome was per-case treatment cost from the payer perspective., Results: Clinical diagnosis was confirmed for 65 unique coded visits (60 patients; 39 with AECB, 22 with CAP; 1 in both cohorts). Initial visit, initial diagnostic testing, and subsequent hospitalization accounted for the majority (63%) of payer costs. Antibiotics were responsible for 15% of payer costs. Higher initial antibiotic expenditure in the AECB cohort yielded a cost-benefit ratio of 3:1. Mean per-case costs for success and failure were $277 & $372 for AECB, and $493 & $3019 for CAP, respectively., Conclusions: Initial visit and hospitalization costs contribute the majority of payer expenditure while antibiotic expenditure incurs a nominal burden. Higher expenditure on initial antibiotic therapy in the AECB population appears to be beneficial.