BACKGROUND: Hospitalization often marks the beginning, and may be partially responsible for, a downward trajectory characterized by declining function, worsening quality of life, placement in a long term care facility, and death. At the University Hospitals of Cleveland, an Acute Care for Elders (ACE) unit that reengineered the process of caring for older patients (> or = 70 years of age) to improve functional outcomes was established in September 1990. DESCRIPTION OF INTERVENTION: The general principles of ACE included an approach to care guided by the biopsychosocial model and recognition of the importance of fitting the hospital environment to the patient's needs. The design of the intervention was consistent with principles of comprehensive geriatric assessment and continuous quality improvement. Care, which focused on maintaining function, was directed by an interdisciplinary team that considered the patient's needs both at home and in the hospital. The major components of the ACE Unit intervention included patient-centered nursing care (daily assessment of functional needs by nursing, nursing-based protocols to improve outcomes, daily rounds by a multidisciplinary team), a prepared environment, planning for discharge, and medical care review. RESULTS: In a randomized trial comparing ACE with usual care, patients receiving ACE had improved functional outcomes at discharge. The costs to the hospital for ACE unit care were less than for usual care. The functional status of ACE and usual care patients was similar 90 days after discharge. FUTURE DIRECTIONS: The ACE unit intervention is being expanded to preserve the improvements observed during the hospitalization in the outpatient setting. In addition, needs other than function which are critical to patients' long-term quality of life are being considered.