Background: One in three hospital acute medical admissions is of an older person with cognitive impairment. Their outcomes are poor and the quality of their care in hospital has been criticised. A specialist unit to care for older people with delirium and dementia (the Medical and Mental Health Unit, MMHU) was developed and then tested in a randomised controlled trial where it delivered significantly higher quality of, and satisfaction with, care, but no significant benefits in terms of health status outcomes at three months., Objective: To examine the cost-effectiveness of the MMHU for older people with delirium and dementia in general hospitals, compared with standard care., Methods: Six hundred participants aged over 65 admitted for acute medical care, identified on admission as cognitively impaired, were randomised to the MMHU or to standard care on acute geriatric or general medical wards. Cost per quality adjusted life year (QALY) gained, at 3-month follow-up, was assessed in trial-based economic evaluation (599/600 participants, intervention: 309). Multiple imputation and complete-case sample analyses were employed to deal with missing QALY data (55%)., Results: The total adjusted health and social care costs, including direct costs of the intervention, at 3 months was £7714 and £7862 for MMHU and standard care groups, respectively (difference -£149 (95% confidence interval [CI]: -298, 4)). The difference in QALYs gained was 0.001 (95% CI: -0.006, 0.008). The probability that the intervention was dominant was 58%, and the probability that it was cost-saving with QALY loss was 39%. At £20,000/QALY threshold, the probability of cost-effectiveness was 94%, falling to 59% when cost-saving QALY loss cases were excluded., Conclusions: The MMHU was strongly cost-effective using usual criteria, although considerably less so when the less acceptable situation with QALY loss and cost savings were excluded. Nevertheless, this model of care is worthy of further evaluation., Trial Registration: ClinicalTrials.gov NCT01136148.