BACKGROUND: In the mid-1990s, the Department of Veterans Affairs (VA) health care system initiated a systemwide reengineering to, among other things, improve its quality of care. We sought to determine the subsequent change in the quality ofhealth care and to compare the quality with that of the Medicare fee-for-service program. METHODS: Using data from an ongoing performance-evaluation program in the VA, we evaluated the quality ofpreventive, acute, and chronic care. We assessed the change in quality-of-care indicators from 1994 (before reengineering) through 2000 and compared the quality ofcare with that afforded by the Medicare fee- for-service system, using the same indicators of quality. RESULTS: In fiscal year 2000, throughout the VA system, the percentage ofpatients receiving appropriate care was 90 percent or greater for 9 of 17 quality-of-care indicators and exceeded 70 percent for 13 of 17 indicators. There were statistically significant improvements in quality from 1994-1995 through 2000 for all nine indicators thatwere collected in all years. As compared with the Medicare fee-for-service program, the VA performed significantly better on all 11 similar quality indicators for the period from 1997 through 1999. In 2000, the VA outperformed Medicare on 12 of 13 indicators. CONCLUSIONS: The quality ofcare in the VA health care system substantially improved after the implementation of a systemwide reengineering and, during the period from 1997 through 2000, was significantly better than that in the Medicare fee-for-service program. These data suggest that the quality-improvement initiatives adopted by the VA in the mid-1990s were effective.