Context Neonates are being discharged from the hospital more rapidly, but the risks associated with this practice, especially for low-income populations, are unclear. Objective To determine the impact of decreasing postnatal length of stay on rehospitalization rates in the immediate postdischarge period for Medicaid neonates. Design and Setting Retrospective, population-based cohort study using Ohio Medicaid claims data linked to vital statistics files from July 1, 1991, to June 15, 1995. Participants A total of 102 678 full-term neonates born to mothers receiving Medicaid for at least 30 days after birth. Main Outcome Measures Rehospitalization rates within 7 and 14 days of discharge, postdischarge health care use, and regional variations in length of stay and rehospitalization. Results The proportion of neonates who were discharged following a short stay (less than 1 day after vaginal delivery, less than 2 days after cesarean birth) increased 185%, from 21 % to 59.8% (P<.001) and the mean (SD) length of stay decreased 27%, from 2.2 (1.0) to 1.6 (0.9) days (P<.001), over the course of the study, The proportion of neonates who received a primary care visit within 14 days of birth increased 117% (P = .001). Rehospitalization rates within 7 and 14 days of discharge decreased by 23 %, from 1.3 % to 1.0% (P = .01), and by 19%, from 2.1% to 1.7% (P = .03), respectively. Short stay across the 6 regions of the state varied significantly over time (P<.001), Factors significantly associated with increased likelihood of rehospitalization within both 7 and 14 days of discharge were white race, shorter gestation, primiparity, earlier year of birth, lower 5-minute Apgar score, vaginal delivery, married mother, and region of the state. Conclusion Our data suggest that reductions in length of stay for full-term Medicaid newborns in Ohio have not resulted in an increase in rehospitalization rates in the immediate postnatal period.