OBJECTIVES: Evidence on the health care costs of laparoscopic versus open surgery remains inconclusive. Previous work has largely used charge data to measure cost, whereas a more relevant metric would be the actual transactions amounts paid. While studies have quantified the association between surgical site infections (SSI) and cost, there is little evidence on the broader measure of nosocomial infections (SSI, UTI, blood and respiratory infections). To address these issues, this study examined the effects of laparoscopic versus open surgery and nosocomial infections on direct health care costs for three common surgical procedures: cholecystectomy, hysterectomy, and appendectomy. METHODS: Hospital discharge abstract data were obtained for 4489 subjects in 10 hospitals who were treated for cholecystectomy, hysterectomy, or appendectomy via laparoscopic or open procedures. Multivariable regression analyses were performed to estimate the relationships between laparoscopic surgery, nosocomial infections and health care costs for these three procedures. The models also controlled for the following confounders: disease severity, age, gender, insurance status and hospital. RESULTS: Laparoscopic surgery significantly reduces the cost of these surgical procedures. For all patients, laparoscopic surgery reduces the health care costs of surgery by $1796 (p <0.01). For cholecystectomies alone, laparoscopic surgery reduces these costs by even more -- $2457 (p<0.01). Laparoscopic surgery reduces costs for hysterectomy by $1888 (p<0.01) and appendectomy by $1019 (p<0.05) Nosocomial infections have a large and significant effect on costs, increasing overall costs by $3591 (p<0.01). The increased costs of nosocomial infections are greatest for cholecystectomies ($5009, p<0.01), followed by appendectomies ($3185, p<0.01) and hysterectomies ($2581, p<0.01). CONCLUSION: Laparoscopic surgery and nosocomial infections are major cost drivers for each of these procedures. Laparoscopic surgery substantially reduces the costs to payers for cholecystectomies, hysterectomies, and appendectomies; whereas nosocomial infections have a large positive effect on transaction costs for all three procedures.