OBJECTIVE: This study aimed at exploring the effect of preoperative risk factors and hospital characteristics on costs of coronary artery bypass graft (CABG) hospitalizations. BACKGROUND: The considerable investment in hospital-based cardiac programs has not been coupled with comparable efforts to explore cost drivers of associated procedures. METHODS: Data sources included (a) New York State's Cardiac Surgery Reporting System, (b) New York State's Statewide Planning and Research Cooperative System dataset, (c) American Hospital Association dataset, and (d) Medicare Hospital Cost Report Public Use files and wage index files. The study population comprised New York state residents who underwent an isolated CABG procedure in a New York State hospital and were discharged in 2003. The outcome measure was inpatient costs. Independent variables included patient (demographic and clinical) and hospital characteristics. RESULTS: The total number of cases was 12,016. Findings revealed that selected demographic characteristics, including older age, female gender, and being black, were associated with higher costs. Several clinical characteristics were found to affect CABG discharge costs such as lower ejection fraction, the duration between CABG admission and the occurrence of myocardial infarction, number of diseased vessels, previous open heart operations, and a number of comorbidities. Furthermore, larger hospitals were associated with higher CABG discharge costs, while costs significantly decreased with higher CABG volume. CONCLUSIONS: Hospitals should explore ways to address patient (patient management) and hospital (case volume), when possible, associated with higher CABG discharge costs in its efforts to contain costs.