OBJECTIVES: The purpose of the study was to estimate the economic burden in ambulatory care of actinic keratosis (AK) and its progressive state squamous cell carcinoma (SCC) noninvasive, and invasive or metastasized SCC. METHODS: prevalence study for 1998 of all costs associated with the treatment of these cases using the National Ambulatory Medical Care Survey and an administrative claims database from selected plans from a national health care company was conducted. An expert panel of dermatology and oncology specialists was used to develop reference cases reflecting the different treatment protocols for AK and nonmelanoma skin cancers. These reference cases were used for case identification and claims extraction as related to treatment pattern for each disease state. The resulting analytical file was then used to calculate the economic burden of illness. The data show that the number of visits and the cost per visit increases with age. RESULTS: The total ambulatory care costs for AK, SCC and basal cell carcinoma (BCC) combined exceed $2.4 billion/year. AK, SCC and BCC are responsible for over 5 million office visits annually. AK patients average 2.31 visits/year and SCC/BCC patients average 2.84 visits/year. SCC and BCC share the same ICD-9-CM diagnosis code, although different in etiology. BCC has no known precursor lesions while SCC presents a progressive state of AK. Assuming conservatively that the per visit costs for BCC and SCC are the same and that 30% of all BCC/SCC cases are SCC, we estimate that the total ambulatory care costs of AK and its sequel SCC exceed $1.1 billion/year. These costs are ambulatory costs only, and do not include outpatient or inpatient treatment. CONCLUSIONS: Ambulatory care spending on AK and SCC is substantial and poses a significant economic burden.