Importance: Providing high-quality care while containing cost is essential for the economic stability of our health care system. The United States is experiencing a rapidly growing elderly population. The Acute Care for Elders (ACE) unit interdisciplinary team model of care has been shown to improve outcomes in hospitalized older adults. The University of Alabama at Birmingham ACE unit incorporates evidence-based care processes. We hypothesized that the ACE model would also reduce costs. Objective: To examine variable direct costs from an interdisciplinary ACE compared with a multidisciplinary usual care (UC) unit. Design: Retrospective cohort study. Setting: Tertiary care academic medical center. Participants: Hospitalists' patients aged 70 years or older spending the entirety of their hospitalization in either the ACE or UC unit in fiscal year 2010. Main Outcome Measures: Using administrative data, we analyzed variable direct costs for ACE and UC patients. We also conducted a subset analysis restricted to the 25 most common diagnosis related groups (DRGs) shared by ACE and UC patients. Generalized linear regression was used to estimate cost ratios and 95% confidence intervals adjusted for age, sex, comorbidity score, and case mix index (CMI). Results: A total of 818 hospitalists' patients met inclusion criteria: 428 from the ACE and 390 from the UC unit. For this study group (all DRGs), the mean (SD) variable direct cost per patient was $2109 ($1870) for ACE and $2480 ($2113) for UC (P =.009). Adjusted cost ratios revealed significant cost savings for patients with low (0.82; 95% CI, 0.72-0.94) or moderate (0.74; 95% CI, 0.62-0.89) CMI scores; care was cost neutral for patients with high CMI scores (1.13; 95% CI, 0.93-1.37). Significantly fewer ACE patients than UC patients were readmitted within 30 days of discharge (7.9% vs 12.8%; P =.02). Subset analysis of the 25 most common DRGs revealed a significantly reduced mean (SD) variable direct cost per patient for ACE compared with UC patients ($1693 [$1063] vs $2138 [$1431]; P < .001); cost ratios for total (0.78; 95% CI, 0.70-0.87) and daily (0.89; 95% CI, 0.85-0.94) variable direct costs remained significant after adjustment. Conclusions and Relevance: The ACE unit team model reduces costs and 30-day readmissions. In an era when improving care processes while reducing costs is a vital objective for the Medicare program and our nation as a whole, the ACE model meets these goals. ©2013 American Medical Association. All rights reserved.