Proposed changes in the Medicare reimbursement method for end-stage renal disease (ESRD) patients prompted us to study the total cost of caring for the ESRD patients in northeast Indiana over a 1-year period. We hoped to ascertain the actual cost of caring for patients treated with different modalities, determine if we could compete in a capitated environment, and identify areas in which we might reduce these expenses. Six patients new to dialysis and 29 patients already receiving treatment underwent follow-up evaluation for 1 year. We tracked their cost of care for 1 year in the outpatient setting as well as in the hospital. We found the cost of caring for all patients was $43,044 per year. Patients new to dialysis cost $3,164 more to care for than patients already receiving dialysis treatment. Hospitalization expense was the primary component of that difference. Continuous ambulatory peritoneal dialysis (CAPD) patients were $14,570 less costly per year to care for than hemodialysis patients. This differential primarily related to decreased hospitalization. Vascular access expenses were a major component of both the outpatient and inpatient cost for hemodialysis patients. Our yearly expenditures for all patients compared with suggested capitated Medicare reimbursement rates suggested that our program could be successful in a new reimbursement model. Several areas of possible cost reduction were identified.