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We compared the effectiveness and costs of day hospital (DH) versus inpatient (INP) rehabilitation for cocaine dependence. The research subjects were 111 inner city, lower socioeconomic, primarily African-American male veterans who qualified for a diagnosis of cocaine dependence and presented no acute medical or psychiatric conditions requiring inpatient treatment. Fifty-six men were randomly assigned to 1 month of DH rehabilitation (27 hours of weekday treatment weekly), and 55 were assigned to 1-month INP rehabilitation (48 hours of scheduled treatment weekly). Treatment outcome was evaluated 7 months after admission into treatment (92% of the subjects), and a cost analysis was performed.A significantly greater proportion of INP subjects (89.1%) completed treatment than did DH subjects (53.6%). Significant improvements in substance use, psychosocial functioning, and health status were found 7 months postadmission for both groups, but there was little evidence of differential improvement between groups. Urine toxicology findings were consistent with the self-report data in showing improvement from baseline, but no group differences in cocaine use. The groups did not differ significantly in postrehabilitation aftercare participation or in relapse to additional treatment. DH treatment costs were 40% to 60% of INP treatment costs, depending upon the measure used.