The purpose of this study was to assess the relative health system costs of early hip spica cast immobilization and external fixation for pediatric femoral shaft fractures. A cost analysis was performed from the viewpoint of the study hospital and physicians using protocols based on current practice. Cost estimates were based on patient and financial information from April 1, 1993, to January 31, 1994, including the fully allocated inpatient and outpatient costs. A sensitivity analysis was conducted to analyze the effect of complications on costs. Total estimated costs (in 1994 Canadian dollars, $1.00 = $0.75 US) of uncomplicated external fixation and hip spica treatments were $7626.30 and $5970.11, respectively. Fifty percent of this difference was attributable to longer inpatient stays for the external fixation treatment. The remaining difference was because of the cost of the fixator, additional operating room staff time costs, and additional professional and technical fees. Total expected costs of treatment complicated by loss of reduction, pin tract infection, and return to the operating room were $7716.01 and $6128.44 for the external fixation and hip spica treatment options, respectively. For the range of complication probabilities considered, expected total costs were always greater with the external fixation option than with the hip spica treatment.