The high cost of emergency department (ED) care is often viewed as an area for achieving cost savings through reduced utilization for inappropriate conditions. The implementation of outpatient prospective payment for Medicare ED patients heightens scrutiny of costs and utilization in the ED versus primary care settings. Data from hospital clinical records, financial records, and a provider survey was used to develop a costing methodology and complete a comparative analysis of the cost of care for three diagnoses by setting. Total costs were significantly higher in the ED due primarily to differences in ancillary tests and prescription drugs ordered.