OBJECTIVES: Osteoarthritis is a major cause of musculoskeletal pain and inability to work. Evidence shows that clinical improvement after viscosupplementation (VS) is able to delaying the average time until total knee arthroplasty (TKA) indication. This study aimed to conduct cost-effectiveness and budget impact analysis (BIA) of viscosupplementation with Orthovisc™ (Hyaluronan) versus conservative treatment in Kellgren & Lawrence(K&L) grades II and III knee osteoarthritis (KOA) from the Brazilian private health care system perspective. METHODS: A 3-year time horizon Markov simulation model was developed to project costs and outcomes associated to KOA progression. Patients could start in ‘Orthovisc™ Treatment’ (conservative treatment + Orthovisc™) or ‘Conservative Treatment’ states and then transit (6-month cycle duration) in states ‘TKA’, ‘Post-operative’ and ‘Death’ according to transition probabilities extracted from systematic review. Only direct medical costs were considered and collected from Brazilian private official databases. Outcome was expressed as ‘avoided TKA procedure’. BIA was developed for a hypothetical private health insurance cohort of 10,000 patients over 50 years. Univariate sensitivity analyses were performed for main parameters. A 5% annual discount rate was applied for costs and benefits. RESULTS: For a hypothetical 1000 patient’s cohort in a 3-year time horizon, 34TKA were performed in Orthovisc™ group versus 164TKA in conservative treatment group, avoiding 130 TKA procedures. Total costs per group were 17,367,259BRL and 17,494,500BRL for Orthovisc™ and conservative treatment groups, respectively, with an incremental cost of -127,241BRL.  Sensitivity analysis showed cost-saving results for years 2 and 3. BIA showed savings of 180,401BRL for the private health insurance and 99TKA avoided in a 3-year time horizon. CONCLUSIONS: Viscosupplementation treatment, based on a Markov simulation model using Orthovisc™ data, in K&L grades II and III KOA showed to be cost-saving regarding avoided TKA in a 3-year time horizon over conservative treatment at Brazilian private health care system, leading to reduction in costs and surgical procedures.