OBJECTIVES: Vertebral compression fractures (VCFs) in osteoporotic patients are associated with chronic pain, a reduction in health-related quality of life (QoL) and high healthcare costs. Balloon Kyphoplasty (BKP) is a minimally invasive procedure that has resulted in pain relief, vertebral body height-restoration, and improved physical functioning in patients with symptomatic VCFs. BKP was shown to improve health-related QoL in a 12-month analysis of a randomised phase-III trial. The objective of this study was to estimate the cost-effectiveness of BKP compared to non-surgical management in a UK setting. METHODS: A Markov cost-effectiveness model was constructed to evaluate BKP after painful hospitalised VCFs from a health care perspective. The model was populated with relevant epidemiology and cost data. It was assumed that QoL-benefits found at 12 months linearly approached zero during the following 24 months and that patients receiving BKP required 6 less hospital bed-days compared to patients given non-surgical management. No reduction of future fracture risk was assumed. The cost of the BKP devices and procedure was £2690 and £1400, respectively. A 43% reduction in mortality during the first year after the procedure was explored in sensitivity analysis. RESULTS: The procedure was in the base-case associated with estimated QALY-gains of 0.17 and cost/QALY of £8800 in 70 year old patients. Results marginally deteriorated with increasing age at the time of surgery due to higher mortality and fracture rates, both of which shorten the accrued benefit of BKP. Inclusion of a mortality reduction resulted in 0.448 life years gained per patient and a cost/QALY of £4600. The results were also sensitive to assumptions about the cost of the procedure, avoided length of hospital-stay and persistence of balloon kyphoplasty-related QoL-benefits. CONCLUSIONS: The results indicate that BKP provides a cost-effective alternative for treating patients with hospitalised VCFs in a UK-setting.