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Patients with primary sclerosing cholangitis (PSC) and colitis are at risk of developing dysplasia and colorectal cancer (CRC). Consequently, annual surveillance colonoscopy with random biopsies is recommended. The aims of the present study were (1) to determine the incidence of dysplasia or CRC, (2) to assess surveillance practices, and (3) to assess the costs associated with surveillance of PSC patients.A population-based study was conducted between 2000 and 2004 to identify all patients with a diagnosis of PSC using regional databases. Colonic histopathology reports of PSC patients with colitis were reviewed to determine the frequency of surveillance colonoscopies performed between 2000 and 2005, the number of biopsies retrieved, and the presence of CRC or dysplasia. The cost of annual surveillance colonoscopy with 33 random biopsies to detect 1 additional case of dysplasia was calculated from a local costs database.Forty-five PSC patients with ulcerative colitis or Crohn's disease were identified. Five patients (11.1%) were diagnosed with low-grade dysplasia (n = 2), dysplasia-associated lesion or mass (n = 2), or CRC (n = 1) during the 5-year follow-up period for an incidence rate of 3.1 events per 100 person-years (95% confidence interval: 1.0–7.2/100 person-years). Two of these lesions were detected through surveillance and 3 because of symptomatic presentation. Only 36% (56) of the expected number of surveillance colonoscopies were performed. The median number of biopsies collected was 27 (IQR: 19–33). The cost of surveillance to detect 1 additional case of dysplasia was $26,495.Despite a high rate of colorectal dysplasia or CRC among PSC patients, surveillance was suboptimal.