OBJECTIVES. To investigate whether care of elderly and disabled patients could be more cost-effective after a short-term hospital stay, we examined the impact of a primary home care intervention program on functional status, use and costs of care after 6 months. METHODS. When clinically ready for discharge from the hospital, chronically ill patients with dependence in one to five functions in personal activities of daily living were randomized to physician-led primary home care with a 24-hour service, and the controls were offered ordinary care. Physical, cognitive, social, and medical functions were assessed in 110 team subjects and 73 controls. Data regarding inpatient days and outpatient visits were collected and converted to costs. RESULTS. Team patients demonstrated better instrumental activities of daily living and outdoor walking and significantly fewer diagnoses and drugs at 6 months. They used less inpatient and more outpatient care compared with the control patients. Significant cost reductions were found in the team group. CONCLUSIONS. This primary home care intervention program is cost-effective, at least for a selection of patients at risk for long-term hospital care.