Aims and objectives:\ud \ud The Healthbasket project seeks to offer evidence on the basket of services offered by the health system in nine member states, and the costs and prices associated with those services. A specific objective of the project is “to\ud identify what are the existing possibilities for and limitation to [cost]comparison and recommend the minimum data required to furnish meaningful international comparison in the future.” To that end, work programme WP7\ud assesses the costing methodologies for inpatient and outpatient health services at the micro-level.\ud \ud \ud The aim of the WP7 subproject is to provide a comprehensive review best practice in cost assessment by examining the scientific literature on methodologies for calculating health service costs. This review examines published scientific literature about the methodologies used to estimate the costs associated with the delivery of a particular service at the micro-level in both in-patient and out-patient settings. In addition, the review summarises the scientific literature on methodologies used in international comparative studies of health service costs at the micro-level, including in-patient and outpatient settings.\ud \ud \ud Methods:\ud \ud A research protocol was developed which comprises a literature search strategy, inclusion and exclusion criteria, data extraction and synthesis methods. Studies were identified through electronic search of several databases, local library files and reference lists of published articles, as well as books. The literature search was extended to Internet websites of governments, academic institutions and large insurance companies’ in order to\ud include unpublished online information. The literature review focuses on publications between 1986 and 2005, and only English language literature was included. Publications were critically appraised using preset quality criteria.\ud \ud (Continues..