Cross-regional healthcare-seeking, defined as utilizing medical services beyond one’s residential area, helps mitigate geographic disparities in health resources but may correlate with elevated financial burdens. As this practice grows in China, particularly in resource-diverse provinces like Shandong, its relationship with hospitalization costs remains insufficiently quantified. This study aims to measure the association between cross-regional care and hospitalization expenditures in Shandong Province, China. Analysis of 2.27 million hospitalizations showed that cross-regional care was associated with higher hospitalization costs but differed by types of cross-regional healthcare-seeking. Seeking care at primary or secondary hospitals within adjacent cities was correlated with reduced expenditures, reflecting proximity-oriented behavior. In contrast, treatment at interprovincial tertiary hospitals was associated with the largest cost increase, with expenditures 206% higher than those for local care. A portion of the association between cross-regional healthcare-seeking and hospitalization costs was transmitted through prolonged length of stay as an intermediary pathway, and this pattern was not evident for interprovincial tertiary care. These heterogeneous cost patterns in Shandong support the development of differentiated governance strategies tailored to these heterogeneous cost drivers.