AbstractThe length of stay in hospital of geriatric patients may be modelled using the Coxian phase‐type distribution. This paper examines previous methods which have been used to model health‐care costs and presents a new methodology to estimate the costs for a cohort of patients for their duration of stay in hospital, assuming there are no further admissions. The model, applied to 1392 patients admitted into the geriatric ward of a local hospital in Northern Ireland, between 2002 and 2003, should be beneficial to hospital managers, as future decisions and policy changes could be tested on the model to investigate their influence on costs before the decisions were carried out on a real ward. Copyright © 2006 John Wiley & Sons, Ltd.