Abstract Background To compare VA inpatient and outpatient utilization and expenditures of veterans seeking primary care in community-based outpatient clinics (CBOCs) and VA medical centers (VAMCs) in fiscal years 2000 (FY00) and 2001. Methods The sample included 25,092 patients who obtained primary care exclusively from 108 CBOCs in FY00, 26,936 patients who obtained primary care exclusively from 72 affiliated VAMCs in FY00, and 11,450 "crossover" patients who obtained primary care in CBOCs and VAMCs in FY00. VA utilization and expenditure data were drawn from the VA's system-wide cost accounting system. Veteran demographic characteristics and a 1999 Diagnostic Cost Group risk score were obtained from VA administrative files. Outpatient utilization (primary care, specialty care, mental health, pharmacy, radiology and laboratory) and inpatient utilization were estimated using count data models and expenditures were estimated using one-part or two-part models. The second part of two-part models was estimated using generalized linear regressions. Results CBOC patients had a slightly more primary care visits per year than VAMC patients (p < 0.0001), but lower primary care costs (-$71, p < 0.0001). CBOC patients had lower odds of one or more specialty, mental health, ancillary visits and hospital stays per year, and fewer numbers of visits and stays if they had any and lower specialty, mental health, ancillary and inpatient expenditures (all, p < 0.0001). As a result, CBOC patients had lower total outpatient and overall expenditures than VAMC patients (p < 0.0001). Conclusion CBOCs provided veterans improved access to primary care and other services, but expenditures were contained because CBOC patients who sought health care had fewer visits and hospital stays than comparable VAMC patients. These results suggest a more complex pattern of health care utilization and expenditures by CBOC patients than has been found in prior studies. This study also illustrates that CBOCs continue to be a critical primary care and mental health access point for veterans.