Background A joint NHS-Local Authority initiative in England designed to provide a dedicated nursing and physiotherapy in-reach team (IRT) to four residential care homes has been evaluated. The IRT supported 131 residents and maintained 15 'virtual' beds for specialist nursing in these care homes. Methods Data captured prospectively (July 2005 to June 2007) included: numbers of referrals; reason for referral; outcome (e.g. admission to IRT bed, short-term IRT support); length of stay in IRT; prevented hospital admissions; early hospital discharges; avoided nursing home transfers; and detection of unrecognised illnesses. An economic analysis was undertaken. Results 733 referrals were made during the 2 years (range 0.5 to 13.0 per resident per annum) resulting in a total of 6,528 visits. Two thirds of referrals aimed at maintaining the resident's independence in the care home. According to expert panel assessment, 197 hospital admissions were averted over the period; 20 early discharges facilitated; and 28 resident transfers to a nursing home prevented. Detection of previously unrecognised illnesses accounted for a high number of visits. Investment in IRT equalled £44.38 per resident per week. Savings through reduced hospital admissions, early discharges, delayed transfers to nursing homes, and identification of previously unrecognised illnesses are conservatively estimated to produce a final reduction in care cost of £6.33 per resident per week. A sensitivity analysis indicates this figure might range from a weekly overall saving of £36.90 per resident to a 'worst case' estimate of £2.70 extra expenditure per resident per week. Evaluation early in implementation may underestimate some cost-saving activities and greater savings may emerge over a longer time period. Similarly, IRT costs may reduce over time due to the potential for refinement of team without major loss in effectiveness. Conclusion Introduction of a specialist nursing in-reach team for residential homes is at least cost neutral and, in all probability, cost saving. Further benefits include development of new skills in the care home workforce and enhanced quality of care. Residents are enabled to stay in familiar surroundings rather than unnecessarily spending time in hospital or being transferred to a higher dependency nursing home setting.