All admissions to a 1,100-bed Department of Veterans Affairs (VA) hospital were screened to identify 171 terminally ill patients with informal caregivers who were then randomly assigned to VA hospital-based team home care (HBHC, N = 85) or customary care (N = 86). Patient functioning, and patient and caregiver morale and satisfaction with care were measured at baseline, one month, and six months. Health services utilization was monitored over the six-month study period and converted to cost. Findings included no differences in patient survival, activities of daily living (ADL), cognitive functioning, or morale, but a significant increase in patient (p = .02) and caregiver (p = .005) satisfaction with care at one month. A substitution effect of HBHC was seen. Those in the experimental group used 5.9 fewer VA hospital days (p = .03), resulting in a $1,639 or 47 percent per capita saving in VA hospital costs (p = .02). As a result, total per capita health care costs, including HBHC, were $769 or 18 percent (n.s.) lower in the HBHC sample, indicating that expansion of VA HBHC to serve terminally ill veterans would increase satisfaction with care at no additional cost.