Several recent advances in wound care may offer promise for the treatment of hard-to-heal venous leg ulcers. One such treatment is Apligraf® (Graftskin), a bilayered, living human skin construct. To assess the economic impact of Graftskin, a model was constructed to compare the annual medical costs and cost-effectiveness of treating hard-to-heal venous leg ulcers with Graftskin vs. compression therapy using Unna's boot. A semi-Markov model was used to describe the pattern of ulcer treatment, healing, and recurrence among patients with venous leg ulcers. Patients received 1 of 2 treatment regimens, Graftskin or Unna's boot, and were followed in the model for a 12-month period. The analysis was done from the perspective of a commercial health plan; therefore, only direct medical costs were included. Health care resource use included the primary therapeutic intervention, additional compression dressings, physician office visits, home health visits, laboratory tests and procedures, management of adverse events, and hospitalizations. The model estimated the annual medical cost of managing patients with hard-to-heal venous leg ulcers to be $20,041 for those treated with Graftskin and $27,493 for those treated with Unna's boot. In addition, treatment with Graftskin led to approximately 3 more months in the healed state per person per year than did treatment with Unna's boot. Because patients treated with Graftskin experienced improved healing compared with those treated with compression therapy using Unna's boot, they required fewer months of treatment for unhealed ulcers. As a result, the use of Graftskin for treating hard-to-heal venous leg ulcers resulted in lower overall treatment costs.