Purpose: To evaluate the cost-effectiveness (CE) of new combined modality strategies in patients with stage III non-small-cell lung cancer (NSCLC). Methods: Recent studies suggest that combined modality therapy confers a survival advantage for patients with stage III NSCLC. Using the Statistics Canada (Ottawa, Canada) lung cancer costing model, we have evaluated the CE of these interventions using 1993 Canadian health care costs and the perspective of the government as payer in a universal health care system. Results: We estimate that the cost to treat a stage IIIa NSCLC patient with preoperative and postoperative chemotherapy would increase by $15,886, and a similar combined modality approach with the addition of post operative radiotherapy would increase the cost by $22,963. Chemoradiotherapy for stage IIIb NSCLC would produce a smaller incremental cost of approximately $8,912 per case. However, these approaches are remarkably cost effective, with cost per life-year gained (LYG) ranging from $3,348 to 514,958. Administering all chemotherapy in the outpatient department would improve CE. For sensitivity analysis, we reduced the survival gain that resulted from the three interventions by 25% and 50%, and increased the hospital per diem rates by 10%, 20%, and 30%. Conclusion: Even with the most adverse assumptions, the CE estimates were all considered acceptable for new health care technologies in Canada. Overall, it appears that neoadjuvant therapy for stage IIIa NSCLC and combined modality therapy for stage IIIb NSCLC are cost-effective. Economic considerations should not be a barrier to their adoption. (C) 1997 by American Society of Clinical Oncology.