The Adult Day Health Care Evaluation Study was developed in response to a congressional mandate to study the medical efficacy and cost effectiveness of the Adult Day Health Care (ADHC) effort in the Department of Veterans Affairs (VA). Four sites providing ADHC in VA facilities are participating in an ongoing randomized controlled trial. Three years of developmental work prior to the study addressed methodological issues that were problematic in previous studies. This developmental work resulted in the methodological approaches described here: (1) a patient recruitment process that actively recruits and screens all potential candidates using empirically developed admission criteria based on predictors of nursing home placement in VA; (2) the selection and development of measures of medical efficacy that assess a wide range of patient and caregiver outcomes with sufficient sensitivity to detect small but clinically important changes; and (3) methods for detailed, accurate, and efficient measurement of utilization and costs of health care within and outside VA. These approaches may be helpful to other researchers and may advance the methodological sophistication of long-term care program evaluation.