OBJECTIVE: Hong Kong, with a population close to 7 million, is an endemic area for hepatitis B virus infection (HBV) with about 10% of the population estimated as carrier. The cost of management of chronic hepatitis B (CHB) can therefore be an enormous burden to the healthcare budget, yet few studies have been performed to assess its potential impact. The present study aims to estimate the direct medical cost in the management of HBV and its complications from a public health organization's perspective. METHOD: The medical history of 488 patients with HBV who received medical services over 5 years from 2 major public hospitals in Hong Kong - Prince of Wales Hospital and United Christian Hospital, were studied. Cost items included hospitalization, professional fees, medications, investigational procedures, surgeries, clinic visits etc. Costs were analyzed according to five disease states: CHB, compensated cirrhosis (CC), decompensated cirrhosis (DC), hepatocellular carcinoma (HCC) and liver transplantation (LT). All costs were calculated in 2000 values. RESULTS: Per patient total annual cost increased with the severity of the disease - from HK$6, 318(US$810) for CHB, HK$10, 304(US$1, 321) for CC, HK$58, 428 (US$7, 490) for DC to HK$121, 822(US$ 15, 618) for HCC. Each case of LT was estimated to cost HK$514, 498(US$ 65,961). Based on local epidemiological data and assuming 50% of the CHB patients were symptomatic, the estimated total cost of management of HBV in Hong Kong was HKD2.6billion (USD3.3M) per year, or about 4% of the 2000-01 actual government healthcare expenditure. The average annual medical cost per patient in this population was HKD3,600 (US$462), with 68% attributable to hospital stay, which therefore appears to be the major cost driver. CONCLUSION: This study confirms HBV and its complications are a significant burden to the healthcare budget of Hong Kong. Public awareness should be enhanced. Slowing disease progression to the more advanced and costly health states should be cost saving.