Abstract Background Up to now, costs attributable to adverse events (AEs) and preventable AEs in the Netherlands were unknown. We assessed the total direct medical costs associated with AEs and preventable AEs in Dutch hospitals to gain insight in opportunities for cost savings. Methods Trained nurses and physicians retrospectively reviewed 7926 patient records in 21 hospitals. Additional patient information of 7889 patients was received from the Dutch registration of hospital information. Direct medical costs attributable to AEs were assessed by measuring excess length of stay and additional medical procedures after an AE occurred. Costs were valued using Dutch standardized cost prices. Results The annual direct medical costs in Dutch hospitals were estimated at a total of euro 355 million for all AEs and euro 161 million for preventable AEs in 2004. The total number of hospital admissions in which a preventable AE occurred was 30,000 (2.3% of all admissions) and more than 300,000 (over 3% of all bed days) bed days were attributable to preventable AEs in 2004. Multilevel analysis showed that variance in direct medical costs was not determined by differences between hospitals or hospital departments. Conclusion The estimates of the total preventable direct medical costs of AEs indicate that they form a substantial part (1%) of the expenses of the national health care budget and are of importance to hospital management. The cost driver of the direct medical costs is the excess length of stay (including readmissions) in a hospital. Insight in which determinants are associated with high preventable costs will offer useful information for policymakers and hospital management to determine starting points for interventions to reduce the costs of preventable AEs.