Atrial fibrillation and atrial flutter are cardiac rhythm disorders that are often symptomatic and may interfere with the heart's function, limiting its effectiveness. These arrhythmias are responsible for a large number of hospitalizations at a significant cost to the healthcare system. Electrical cardioversion (EC) is the most common nonpharmacologic intervention used to convert atrial fibrillation and atrial flutter to normal rhythm. Electrical cardioversion is highly successful in converting patients to normal rhythm; however, it is more traumatic and resource intensive than pharmacologic treatment. Recently, a new rapid-acting drug, ibutilide, was approved for the conversion of atrial fibrillation and atrial flutter. Ibutilide is administered through intravenous infusion and does not require anesthetization of the patient, as is required for EC. A decision-tree model was developed to estimate the cost-effectiveness of ibutilide therapy compared with EC therapy. Clinical outcomes were based on a phase III trial of ibutilide, and resource use was based on the literature and physician clinical judgment. A stepped conversion regimen of first-line ibutilide followed by EC for patients who fail to convert is less expensive and has a higher conversion rate than first-line EC. Sensitivity analysis shows that our results are robust to changes in cost and effectiveness estimates.