Patient outcomes and cost were compared when home healthcare was delivered by telemedicine or by traditional means for patients receiving skilled nursing care at home. A randomized controlled trial was established using three groups. The first group, control group C, received traditional skilled nursing care at home. The second group, video intervention group V, received traditional skilled nursing care at home and virtual visits using videoconferencing technology. The third group, monitoring intervention group M, received traditional skilled nursing care at home, virtual visits using videoconferencing technology, and physiologic monitoring for their underlying chronic condition. Discharge to a higher level of care (hospital, nursing home) within 6 months of study participation was 42% for C subjects, 21% for V subjects, and 15% for M subjects. There was no difference in mortality between the groups. Morbidity, as evaluated by changes in the knowledge, behavior and status scales of the Omaha Assessment Tool, showed no differences between groups except for increased scores for activities of daily living at study discharge in the V and M groups. The average visit costs were $48.27 for face-to-face home visits, $22.11 for average virtual visits (video group), and $32.06 and $38.62 for average monitoring group visits for congestive heart failure and chronic obstructive pulmonary disease subjects, respectively. This study has demonstrated that virtual visits between a skilled home healthcare nurse and chronically ill patients at home can improve patient outcome at lower cost than traditional skilled face-to-face home healthcare visits.