Current guidelines for the management of patients with compensated cirrhosis recommend universal screening endoscopy followed by prophylactic β-blocker therapy to prevent initial hemorrhage in those found to have esophageal varices. However, the cost-effectiveness of this recommendation has not been established. Our objective was to determine whether screening endoscopy is cost-effective compared with empiric medical management in patients with compensated cirrhosis. Decision analysis with Markov modeling was used to calculate the cost-effectiveness of 6 competing strategies: (1) universal screening endoscopy (EGD) followed by β-blocker (BB) therapy (EGD→BB) if varices are present, (2) EGD followed by endoscopic band ligation (EBL) (EGD→EBL) if varices are present, (3) selective screening endoscopy (sEGD) in high risk patients followed by BB therapy if varices are present (sEGD→BB), (4) selective screening endoscopy followed by EBL (sEGD→EBL) if varices are present, (5) empiric β-blocker therapy in all patients, and (6) no prophylactic therapy (“Do Nothing”). Cost estimates were from a third-party payer perspective. The main outcome measure was the cost per initial variceal hemorrhage prevented. The “Do Nothing” strategy was the least expensive yet least effective approach. Compared with the “Do Nothing” strategy, the empiric β-blocker strategy cost an incremental $12,408 per additional variceal bleed prevented. Compared with the empiric β-blocker strategy, in turn, both the EGD→BB and the EGD→EBL strategies cost over $175,000 more per additional bleed prevented. The sEGD→BB and sEGD→EBL strategies were more expensive and less effective than the empiric β-blocker strategy. In conclusion, empiric β-blocker therapy for the primary prophylaxis of variceal hemorrhage is a cost-effective measure, as the use of screening endoscopy to guide therapy adds significant cost with only marginal increase in effectiveness.