Psychiatric care for nursing home residents is difficult to obtain, especially in rural areas, and this deficiency may lead to significant morbidity or death. Providing this service by videoconference may be a helpful, cost-effective, and acceptable alternative to face-to-face treatment. We analyzed data for 278 telepsychiatry encounters for 106 nursing home residents to estimate potential cost and time savings associated with this modality compared to in-person care. A total of 843.5 hours (105.4 8-hour work days) of travel time was saved compared to in-person consultation for each of the 278 encounters if they had occurred separately. If four resident visits were possible for each trip, the time saved would decrease to 26.4 workdays. Travel distance saved was 43,000 miles; 10,750 miles if four visits per trip occurred. More than $3,700 would be spent on gasoline for 278 separate encounters; decreased to $925 for four visits per roundtrip. Personnel cost savings estimates ranged from $33,739 to $67,477. Physician costs associated with additional travel time ranged from $84,347 to $253,040 for 278 encounters, or from $21,087 to $63,260 for four encounters per visit. The telepsychiatry approach was enthusiastically accepted by virtually all residents, family members, and nursing home personnel, and led to successful patient management. Providing psychiatric care to rural nursing home residents by videoconference is cost effective and appears to be a medically acceptable alternative to face-to-face care. In addition, this approach will allow many nursing homes to provide essential care that would not otherwise be available.