Alternatives to inpatient care that improve quality of care and save money are desirable during periods of restraint on hospital budgets. One such alternative is the care-by-parent unit (CBPU) in which a parent's stay on the ward can reduce costs by resuming nursing tasks, limiting unnecessary procedures, and encouraging early discharge. This study measured costs per case treated in the CBPU compared with the costs for similar patients treated in the inpatient nursing unit (NU). Average costs per episode were lower in the CBPU--33 per cent for general pediatrics, 13.5 per cent for tonsils and adenoids and 29 per cent for other surgery. These savings are capable of considerable expansion because more than half of the admissions to NU meet the criteria for admission to CBPU. If CBPU facilities were expanded, however, the savings estimated above would not follow automatically. New CBPU facilities must substitute for NU, not add to total utilization.