Clozapine therapy for treatment-resistant schizophrenic patients resulted in decreases in psychopathology and reductions in mental health service costs. The majority of these savings were due to reduced use of inpatient hospital services. Reduction of the need for hospital services improves the quality of life of this group of chronic patients, as long as necessary aftercare services are available.An additional advantage of clozapine is the increased clinical contact that results from frequent monitoring for possible hematologic effects. This contact may contribute to a more appropriate level of care for schizophrenic patients in a community setting. Although community service costs for these patients might increase, improved quality of care and early intervention in the event of an acute schizophrenic episode may result in improved patient functioning and decreased total costs.Economic benefits were observed after two years of clozapine therapy. If these findings are generalizable beyond two years, clozapine may result in large savings to state and federal government institutions and insurers, as well as considerable clinical benefits to patients.