The study aims to report service use and costs for patients with Alzheimer's disease (AD) and to explore the incremental influence of sociodemographic and illness-related determinants in ambulatory and inpatient settings within the German health care system. 395 patients with dementia were recruited at the following sites: 1) University hospital, 2) general practitioners' offices, 3) office-based neurologists, 4) a regional psychiatric hospital, and 5) nursing homes. Sociodemographic, economic, and clinical parameters were assessed using a standardized questionnaire. Informal care was not evaluated. Disease severity was measured using the Mini-Mental Status Examination and the Alzheimer's Disease Assessment Scale - Cognitive Subscale. Neuropsychiatric status was assessed using the Geriatric Depression Scale, the Neuropsychiatric Inventory, and the Alzheimer's Disease Cooperative-Study-Activities of Daily Living. Annual total costs were estimated to be €13,080 per patient. The most important cost component was (long-term) care, constituting about 43% of total costs. Indirect costs comprised about 18% of total costs and were mainly due to reductions in working time of caregivers. Poorer functional status was associated with higher total and caregiving costs. In multivariate analyses, we identified younger age, female gender, and impaired activities of daily living as independent predictors of higher costs. Given that care for patients with AD is complex and expensive, our models were only able to explain about 17-43% of the variability in total costs. This suggests that further social and individual factors considerably influence the costs associated with AD. Direct medical care costs and long-term care costs related differently to the patient's clinical characteristics. Longitudinal and population-based studies are necessary for thoroughly evaluating the burden of disease.