Hospitalizations of nursing home residents are frequent and result in complications, morbidity, and Medicare expenditures of more than a billion dollars annually. The lack of a physician presence at many nursing homes during off hours might contribute to inappropriate hospitalizations. Findings from our controlled study of eleven nursing homes provide the first indications that switching from on-call to telemedicine physician coverage during off hours could reduce hospitalizations and therefore generate cost savings to Medicare in excess of the facility’s investment in the service. But those savings were evident only at the study nursing homes that used the telemedicine service to a greater extent, compared to the other study facilities. Telemedicine service providers and nursing home leaders might need to take additional steps to encourage buy-in to the use of telemedicine at facilities with such services. At the same time, closer alignment of the stakeholders that bear the costs of telemedicine and those that might realize savings because of its use could offer further incentives for the adoption of telemedicine.