Nonphysician providers (NPP) increasingly fill roles traditionally performed by housestaff. Downsizing of a pediatric residency program prompted phased replacement of housestaff in a 26-bed neonatal intensive care unit (NICU). Subsidized education for neonatal nurse-practitioners, recruitment of physician assistants, and NPP leadership took place over 18 months, at which time all housestaff functions were assumed by NPP. Cost to establish the program, impact on hospital revenue under New York's prospective reimbursement system, and quality of care were evaluated. The net startup cost for the NPP program was $441,000 ($722,000 for education, salaries, staff replacement, and recruitment, partially offset by a New York State workforce demonstration project grant). Ongoing costs of the program are $1.2 million/yr (including salaries, off-hours medical backup, recruitment, administrative overhead, and loss of indirect and direct medical education reimbursement, partially offset by recaptured housestaff salaries and ancillary expense reductions). Access to care was maintained. Quality of care was assessed during the last 6 months of housestaff and the first 6 months of full NPP staffing, revealing similar weight-specific survival, and improvement in documentation and compliance with immunization and blood utilization guidelines during the NPP period. NPP are expensive in comparison to housestaff. Revenue is minimally adversely affected, but access to NICU services and quality of care was preserved and in some cases enhanced with NPP. In the context of graduate medical education reform, staffing problems such as ours will be encountered increasingly in inpatient subspecialty settings.