BACKGROUND Respiratory syncytial virus (RSV) is a common reason for hospitalization of infants. In clinical trials, palivizumab reduced RSV hospitalization rates for premature infants. The 2014 American Academy of Pediatrics clinical practice guideline advised against use of palivizumab for otherwise healthy infants ≥29 weeks' gestation. The aim of this study was to determine the effect of palivizumab administration on hospitalization rates for RSV and bronchiolitis without RSV diagnosis among infants 29 to 36 weeks' gestation who do not have chronic illness. METHODS Claims data were extracted from databases of 9 Texas Medicaid managed care programs. Eligible infants were 29 to 36 weeks' gestation, without claims suggesting chronic illness, and who were born between April 1 and December 31 of 2012, 2013, and 2014. RESULTS A total of 2031 eligible infants of 29 to 32 weeks' gestation and 12 066 infants of 33 to 36 weeks' gestation were identified; 41.5% of the infants 29 to 32 weeks' gestation and 3.7% of the infants 33 to 36 weeks' gestation had paid claims for dispensing of ≥1 palivizumab doses. Among the infants of 29 to 32 weeks' gestation, palivizumab dispensing was associated with reduced RSV hospitalization rates (3.1% vs 5.0%, P = .04) but increased hospitalizations for bronchiolitis without RSV diagnosis (3.3% vs 1.9%, P = .05). There were no significant differences by palivizumab administration status for the infants of 33 to 36 weeks' gestation. CONCLUSIONS Among infants 29 to 32 weeks' gestation without chronic illness, palivizumab use was associated with reduced RSV hospitalizations but increased hospitalizations for bronchiolitis without RSV diagnosis.