Intermediate care is part of a package of initiatives introduced by the UK Government mainly to relieve pressure on acute hospital beds and reduce delayed discharge (bed blocking). Intermediate care involves caring for patients in a range of settings, such as in the home or community or in nursing and residential homes. This paper considers the scope of intermediate care and its role in relation to acute hospital services. In particular, it develops a framework that can be used to inform decisions about the most cost-effective care pathways for given clinical situations, and also for wider planning purposes. It does this by providing a model for evaluating the costs of intermediate care services provided by different agencies and techniques for calibrating the model locally. It finds that consistent application of the techniques over a period of time, coupled with sound planning and accounting, should result in savings to the health economy.