Hospital spending represents approximately one third of total national health spending, and the majority of hospital spending is by public payers. Elderly individuals with long-term care needs are at particular risk for hospitalization. While some hospitalizations are unavoidable, many are not, and there may be benefits to reducing hospitalizations in terms of health and cost. This article reviews the evidence from 55 peer-reviewed articles on interventions that potentially reduce hospitalizations from formal long-term care settings. The interventions showing the strongest potential are those that increase skilled staffing, especially through physician assistants and nurse practitioners; improve the hospital-to-home transition; substitute home health care for selected hospital admissions; and align reimbursement policies such that providers do not have a financial incentive to hospitalize. Much of the evidence is weak and could benefit from improved research design and methodology.