A 2-year experimental cost study of 10 Intensive Psychiatric Community Care (IPCC) programs was conducted at Department of Veterans Affairs (VA) medical centers in the Northeast. High hospital users were randomly assigned to either IPCC (n = 454) or standard VA care (n = 419) at four neuropsychiatric (NP) and six general medical and surgical (GMS) hospitals. National computerized data were used to track all VA health care service usage and costs for 2 years following program entry. At 9 of the 10 sites, IPCC treatment resulted in reduced inpatient service usage. Overall, for IPCC patients compared with control patients, average inpatient usage was 89 days (33%) less while average cost per patient (for IPCC inpatient, and outpatient services) was $15,556 (20%) less. Additionally, costs for IPCC patients compared with control patients were $33,295 (29%) less at NP sites but were $6,273 (15%) greater at GMS sites. At both NP and GMS sites, costs were lower for IPCC patients in two subgroups: veterans over age 45 and veterans with high levels of in-patient service use before program entry. No interaction was noted between the impact of IPCC on costs and other clinical or sociodemographic characteristics. Similarly, no linear relationship was observed between the intensity of IPCC services and the impact of IPCC on VA costs, although the two sites that did not fully implement the IPCC program had the poorest results. With these sites excluded, the total cost of care for IPCC patients at GMS sites was $579 (3%) more per year than that for the control patients.