OBJECTIVES: To assess the health economic impact of oral nutritional supplements (ONS), being a medical nutrition product, in residential care  from the society perspective in Germany in 2009. METHODS: This health economic analysis is based on a comparison of the use of ONS versus “no ONS” in residential care patients who are eligible for ONS due to disease-related malnutrition (DRM). The costs of the two treatment strategies ONS versus “no ONS” were assessed using a linear decision analytic model reflecting costs related with DRM. The model structure allowed for differences in costs for ONS and cost of care. Clinical probabilities and resource utilization were based on clinical trials and published literature; cost data were from official price tariffs. RESULTS: The use of ONS reduces the total costs from € 16,617 to € 15,453, which corresponds with a €1,164 cost savings per residential care patient. The additional costs of ONS are more than balanced by a reduction on cost of care. Sensitivity analyses were performed on all parameters, including cost of care and improvement of DRM. These results showed that the use of ONS in all sensitivity analyses leads to cost savings. CONCLUSIONS: This health economic analysis shows that the use of ONS in  residential care patients is a cost-effective treatment in Germany and is dominant over standard care without ONS: it leads to cost savings and a higher effectiveness.