Telemedicine was used as a substitute for the telephone (usual care) for some acute care consultations from nurseries at four peripheral hospitals in Queensland. Over a 12-month study period, there were 19 cases of neonatal teleconsultation. Five (26%) cases of avoided infant transport were confirmed by independent assessment, four of which were avoided helicopter retrievals. We conducted two analyses. In the first, the actual costs of providing telemedicine at the study sites were compared with the actual savings associated with confirmed avoided infant transport and nursery costs. There was a net saving to the health system of 54,400 Australian Dollars (AUD) associated with the use of telemedicine over the 12-month period. In the second analysis, we estimated the potential savings that might have been achieved if telemedicine had been used for all retrieval consultations from the study sites. The total projected costs were AUD 64,969 while the projected savings were AUD 271,042, i.e. a projected net saving to the health system of AUD 206,073 through the use of telemedicine. A sensitivity analysis suggested that the threshold proportion of retrievals needed to generate telemedicine-related savings under the study conditions was 5%. The findings suggest that from the health-service perspective, the use of telemedicine for acute care neonatal consultation has substantial economic benefits.