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The Virtual Lifetime Electronic Record (VLER) Health program provides the Veterans Health Administration (VHA) a framework whereby VHA providers can access the veterans’ electronic health record information to coordinate healthcare across multiple sites of care. As an early adopter of VLER, the Indianapolis VHA and Regenstrief Institute implemented a regional demonstration program involving bi-directional health information exchange (HIE) between VHA and non-VHA providers.The aim of the study is to determine whether implementation of VLER HIE reduces 1 year VHA medical costs.A cohort evaluation with a concurrent control group compared VHA healthcare costs using propensity score adjustment. A CHEERs compliant checklist was used to conduct the cost evaluation.Patients were enrolled in the VLER program onsite at the Indianapolis VHA in outpatient clinics or through the release-of-information office.VHA cost data (in 2014 dollars) were obtained for both enrolled and nonenrolled (control) patients for 1 year prior to, and 1 year after, the index date of patient enrollment.There were 6104 patients enrolled in VLER and 45,700 patients in the control group. The annual adjusted total cost difference per patient was associated with a higher cost for VLER enrollees $1152 (95% CI: $807–1433) (P < 0.01) (in 2014 dollars) than VLER nonenrollees.Short-term evaluation of this demonstration project did not show immediate reductions in healthcare cost as might be expected if HIE decreased redundant medical tests and treatments. Cost reductions from shared health information may be realized with longer time horizons.