This article estimates excess costs associated with postoperative complications among inpatients treated in Veterans Health Administration (VA) hospitals. The authors conducted an observational study on 43,822 hospitalizations involving inpatient surgery in one of 104 VA hospitals during fiscal year 2007. Hospitalization-level cost regression analyses were performed to estimate the excess cost of each of 18 unique postoperative complications. The authors used generalized linear modeling techniques to account for the heavily skewed cost distribution. Costs were measured using an activity-based cost accounting system and complications were assessed based on medical chart review conducted by the VA 'National Surgical Quality Improvement Program. The authors found excess costs associated with postoperative complications ranging from $8,338 for "superficial surgical site infection" to $29,595 for "failure to wean within 24 hours in the presence of respiratory complications." The results obtained suggest that quality improvement efforts aimed at reducing postoperative complications can contribute significantly to lowering of hospital costs.