In 1974 a new therapy that employs methoxsalen and ultraviolet A irradiation (PUVA) was introduced as an outpatient treatment for severe psoriasis. To study the effect of this therapy on the cost of treatment, we documented for 1,320 patients two major components of cost--hospitalization and PUVA treatments. When the one-year period before initiation of PUVA therapy was compared with a one-year period after initiation of PUVA therapy, average hospital days per person per year declined 77% (5.1 vs 1.2). This decrease in hospitalization was most notable among patients who continued to use PUVA therapy. Largely offsetting the reduction in cost from reduced hospitalization was the cost of PUVA treatments. Our data confirm the previously known effectiveness of PUVA therapy, and they provide no support for the hypothesis that PUVA substantially increases the cost of treating patients with severe psoriasis.