OBJECTIVES: To estimate the budget impact of adding an outpatient pharmacy-based transition of care (TOC) program to the benefit of a US managed Medicaid health plan. METHODS: A dynamic budget impact analysis was conducted using a decision-tree model developed in Microsoft Excel. The effect on inpatient and total healthcare costs from the payer perspective was estimated in the 2-year period following initial hospital discharge. Inputs were based on a total plan population of 240,000 lives, with a high-risk population of 7.5%. The TOC program was assumed to initially cover 30% of the high-risk group, with expansion to 60% over the 2 years. We previously reported that this program reduced readmission risk by 32% and saved the health plan $2,139 per patient referred, inclusive of program cost. Sensitivity analyses were performed to test the impact of uncertainty of model inputs on the results, with the cost of TOC services ranging from $99 to $2,000 per patient referred. RESULTS: The model showed that the TOC program was cost-saving at over $3 per member per month, translating into over $25 million in total healthcare cost savings over 2 years. These results were primarily driven by the estimated reduction in inpatient costs associated with the program, which were estimated at $20 million over the 2 years. Sensitivity analyses illustrated that within all the reasonable ranges of model input parameters, including the upper limit of TOC services set to $2,000 per patient referred, the TOC program resulted in cost savings to the health plan. CONCLUSIONS: The TOC program resulted in cost savings of over $25 million to the health plan over a period of 2 years.