BACKGROUND: Hospitalizations for ambulatory care sensitive conditions are commonly used to evaluate primary health care performance, as the hospital admission could be avoided if care was timely and adequate. Previous evidence indicates that avoidable hospitalizations carry a substantial direct financial burden in some countries. However, no attention has been given to the economic burden on society they represent. The aim of this study is to estimate the direct and lost productivity costs of avoidable hospital admissions in Portugal. METHODS: Hospitalizations occurring in Portugal in 2015 were analyzed. Avoidable hospitalizations were defined and their associated costs and years of potential life lost were calculated. Direct costs were obtained using official hospitalization prices. For lost productivity, there were estimated costs for absenteeism and premature death. Costs were analyzed by components, by conditions and by variations on estimation parameters. RESULTS: The total estimated cost associated with avoidable hospital admissions was €250 million (€2515 per hospitalization), corresponding to 6% of the total budget of public hospitals in Portugal. These hospitalizations led to 109,641 years of potential life lost. Bacterial pneumonia, congestive heart failure and urinary tract infection accounted for 77% of the overall costs. Nearly 82% of avoidable hospitalizations were in patients aged 65 years or older, therefore did not account for the lost productivity costs. Nearly 84% of the total cost comes from the direct cost of the hospitalization. Lost productivity costs are estimated to be around €40 million. CONCLUSION: The age distribution of avoidable hospitalizations had a significant effect on costs components. Not only did hospital admissions have a substantial direct economic impact, they also imposed a considerable economic burden on society. Substantial financial resources could potentially be saved if the country reduced avoidable hospitalizations.