Abstract Objective This study explores the association between psychiatrist case volumes and costs for hospitalized schizophrenia patients. Methods The study uses the Taiwan National Health Insurance Research Database for 2003, identifying the study subjects from the database by ICD-9-CM principal diagnosis code 295. Our study sample comprises of 135,621 admissions treated by 787 psychiatrists in 181 hospitals, with the sample being divided equally into three psychiatrist volume groups: ≤ 300 (low volume), 301–600 (medium volume) and ≥ 601 admissions (high volume). After adjusting for psychiatrist, patient and hospital characteristics, multiple regression analyses were performed to determine the association between psychiatrist case volume and hospitalization costs (total, drug, and non-drug). Results The regression analyses showed that after adjusting for psychiatrist, patient and hospital characteristics, average treatment costs associated with hospitalized schizophrenia patients were inversely related to psychiatrist volume. The respective total costs, drug costs and non-drug costs of patients treated by high-volume psychiatrists were US$369 ( p < 0.001), US$26 ( p < 0.001) and US$343 ( p < 0.001) lower than those of low-volume psychiatrists. The respective total costs, drug costs and non-drug costs for those treated by medium-volume psychiatrists were US$248 ( p < 0.001), US$22 ( p < 0.001) and US$226 ( p < 0.001) lower than those of low-volume psychiatrists. Conclusions We find that after adjusting for patient, psychiatrist and hospital characteristics, an inverse volume–cost relationship exists for psychiatrists treating schizophrenia patients. Further studies should aim to investigate the volume-quality relationship to ensure that incremental cost savings associated with increased patient volume are not achieved at the expense of quality of patient care.