ABSTRACT: Using observational data to assess the relative effectiveness of alternative cancer treatments is limited by patient selection into treatment, which often biases interpretation of outcomes. We evaluated methods for addressing confounding in treatment and survival of patients with early-stage prostate cancer in observational data and compared findings with those from a benchmark randomized clinical trial.We selected 14?302 early-stage prostate cancer patients who were aged 66-74 years and had been treated with radical prostatectomy or conservative management from linked Surveillance, Epidemiology, and End Results-Medicare data from January 1, 1995, through December 31, 2003. Eligibility criteria were similar to those from a clinical trial used to benchmark our analyses. Survival was measured through December 31, 2007, by use of Cox proportional hazards models. We compared results from the benchmark trial with results from models with observational data by use of traditional multivariable survival analysis, propensity score adjustment, and instrumental variable analysis.Prostate cancer patients receiving conservative management were more likely to be older, nonwhite, and single and to have more advanced disease than patients receiving radical prostatectomy. In a multivariable survival analysis, conservative management was associated with greater risk of prostate cancer-specific mortality (hazard ratio [HR] = 1.59, 95% confidence interval [CI] = 1.27 to 2.00) and all-cause mortality (HR = 1.47, 95% CI = 1.35 to 1.59) than radical prostatectomy. Propensity score adjustments resulted in similar patient characteristics across treatment groups, although survival results were similar to traditional multivariable survival analyses. Results for the same comparison from the instrumental variable approach, which theoretically equalizes both observed and unobserved patient characteristics across treatment groups, differed from the traditional multivariable and propensity score results but were consistent with findings from the subset of elderly patient with early-stage disease in the trial (ie, conservative management vs radical prostatectomy: for prostate cancer-specific mortality, HR = 0.73, 95% CI = 0.08 to 6.73; for all-cause mortality, HR = 1.09, 95% CI = 0.46 to 2.59).Instrumental variable analysis may be a useful technique in comparative effectiveness studies of cancer treatments if an acceptable instrument can be identified.