Coronary artery bypass graft (CABG) operations consume more health care resources than any other single procedure. The objective of this study was to develop a computer simulation model that can be used to predict costs and patient outcomes of CABG surgery. The analysis is based on a systems dynamic model developed using STELLA software. Two sets of data from Medicare patients who underwent CABG operations at Methodist Hospital of Indiana were used to construct and validate the model. The model predictions of length of hospital stay, use of specialists in caring for patients, costs and postoperative functional status are reasonably close to actual data on patients who underwent CABG surgery. The analysis indicates the most important factors affecting costs and outcomes are gender, age, whether or not the surgery is a reoperation and whether the patient experiences postoperative complications. The model can be used to predict costs and outcomes for a patient population from a small set of preoperative characteristics (i.e., age, gender, DRG, whether the surgery is a reoperation, and the patient's operative status). A second potential use of the model is to answer clinical questions such as do the costs and risks of CABG operations outweigh the benefits for patients with certain risk factors.