OBJECTIVES: To calculate the cost-effectiveness of palivizumab for the prevention of respiratory syncytial virus (RSV) hospitalization by risk group, using real-world cost and incidence estimates. METHODS: Decision trees were used to calculate incremental cost effectiveness ratios (ICERs) as the direct medical cost required to prevent one RSV-related hospitalization within 8 risk groups based on indication. Risk groups were defined by age and combinations of comorbid conditions (chronic lung disease [CLD], congenital heart disease [CHD], or prematurity up to 32 weeks’ gestational age), in accordance with treatment guidelines. Cost and incidence parameters were derived from Florida Medicaid claims data (October 2004 to March 2005) using ICD-9 and national drug codes; palivizumab effectiveness was estimated from clinical trial data. RESULTS: Among 611,451 infant-months, 9,805 had claims for palivizumab. Mean cost for a single dose ranged from $1347 [95% confidence interval (CI): 1336 - 1358] for infants under 6 months to $2096 [CI: 2081 - 2110] for children 1-2 years of age. Seasonal 6-month RSV hospitalization rate ranged from 1.25% [CI: 0.6 - 2.0] in children without indication to 8.13% [CI: 4.3 - 13.9] in premature infants with CHD. ICERs for palivizumab prophylaxis ranged from $246,719 [CI:  109,376 - 877,173] for premature infants up to 6 months old to $1,796,002 [CI: 656,705 - 9,910,719] for infants without indication. Having at least one indication resulted in ICER of $698,227 [CI:  290,981 – 2,475,180] for children <2 years of age. By comparison, the mean cost for RSV-related hospitalizations ranged from $4,111 [CI: 3,891 - 4,330] for children without indication to $9816 [CI: 8,904 - 10,727] for children with CLD. CONCLUSIONS: ICERs for palivizumab were found to be high, with prophylaxis cost far exceeding the direct financial benefit of preventing hospitalizations. Factors associated with lower ICERs included young age and the presence of multiple indications.