Aims and method A retrospective evaluation was undertaken of the clinical and economic effectiveness of three in-patient rehabilitation units across one London National Health Service trust. Information on admission days and costs 2 years before and 2 years after the rehabilitation placement, length of rehabilitation placement and the discharge pathway was collected on 22 service users.Results There were statistically significant reductions in hospital admission days in the 2 years following rehabilitation compared with the 2 years before, further reflected in significantly lower bed costs. Longer length of rehabilitation placement was correlated with fewer admission days after the placement. A substantial proportion of the sample went into more independent living, some with no further admissions at follow-up.Clinical implications The findings suggest that in-patient rehabilitation is both clinically and cost effective: if benefits are sustained they will offset the cost of the rehabilitation placement.