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In Malaysia, there is exponential growth of patients on dialysis. Dialysis treatment consumes a considerable portion of healthcare expenditure. Comparative assessment of their cost effectiveness can assist in providing a rational basis for preference of dialysis modalities. A cost utility study of hemodialysis (HD) and continuous ambulatory peritoneal dialysis (CAPD) was conducted from a Ministry of Health (MOH) perspective. A Markov model was also developed to investigate the cost effectiveness of increasing uptake of incident CAPD to 55% and 60% versus current practice of 40% CAPD in a five-year temporal horizon. A scenario with 30% CAPD was also measured. The costs and utilities were sourced from published data which were collected as part of this study. The transitional probabilities and survival estimates were obtained from the Malaysia Dialysis and Transplant Registry (MDTR). The outcome measures were cost per life year (LY), cost per quality adjusted LY (QALY) and incremental cost effectiveness ratio (ICER) for the Markov model. Sensitivity analyses were performed. LYs saved for HD was 4.15 years and 3.70 years for CAPD. QALYs saved for HD was 3.544 years and 3.348 for CAPD. Cost per LY saved was RM39,791 for HD and RM37,576 for CAPD. The cost per QALY gained was RM46,595 for HD and RM41,527 for CAPD. The Markov model showed commencement of CAPD in 50% of ESRD patients as initial dialysis modality was very cost-effective versus current practice of 40% within MOH. Reduction in CAPD use was associated with higher costs and a small devaluation in QALYs. These findings suggest provision of both modalities is fiscally feasible; increasing CAPD as initial dialysis modality would be more cost-effective. [ABSTRACT FROM AUTHOR]