Home hospitalization (HH), as a substitute to in-patient care, is an area of growing interest, particularly amongst the elderly. Debate nonetheless exists concerning its economic justification. This study describes a natural experiment that arose following spending cuts and closure of the 400 patient Jerusalem HH program. It examines the hypothesis that HH closure would cause increasing geriatric and general medical hospital utilization amongst the 45,000 beneficiaries of the Jerusalem Clalit Health Fund (HMO) aged 65 years and over. Hospitalization rates were measured prior to and following HH closure, and analysis of variance confirmed the significance of the differences in both geriatric (p<0.0001) and general medical hospitalization rates (p=0.02) over the study period. Linear regression analyses of the hospitalization rates prior to HH closure were performed to determine the expected trajectory of hospitalization rates following HH closure. The observed hospital utilization in the year following HH closure cost 6.2 million US dollars in excess of predicted expenditure; closure of the HH resulted in the saving of 1.3 million USdollars. The ratio of direct increased costs to savings was 5:1 thus confirming the hypothesis that HH closure would result in increased hospital utilization rates among the local elderly population.