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Cost-utility analysis, used increasingly over the past decade to analyze costs and effects in treating physical diseases, has received little attention in psychiatry. This article briefly introduces the concepts and methods of utility measurement and illustrates it using depression as an example. The authors describe the McSad health state classification system for depression, a direct utility measure for depression, and report results of an application of McSad among 105 patients who had a recent history of depression. Utility measures express patient preferences for specific health states on a scale ranging from 0, representing death, to 1, representing perfect health. These scores provide the weights used to calculate the number of quality-adjusted life-years gained by an intervention or service. McSad allows a patient's depression health state to be classified according to level of functioning in six dimensions of depression and to be compared with other hypothetical depression health states in order to produce utility scores indicating the patient's relative preferences.