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Objective: To estimate savings in the cost of caring for patients with Alzheimer's disease (AD) during 6 months, 1 year and 2 years of treatment with rivastigmine. An intermediate objective was to estimate the relationship between disease progression and institutionalisation. Design and setting: We assessed the relationship between Mini-Mental State Examination (MMSE) score and institutionalisation using a piecewise Cox proportional hazard model. To estimate cost savings from treatments lasting 6 months, 1 year and 2 years, estimates of the probability of institutionalisation were integrated with data from two 6-month phase III clinical trials of rivastigmine and a hazard model of disease progression. Main outcome measures and results: Our data suggest that savings in the overall cost of caring for patients with mild and moderate AD can be as high as $US4839 per patient after 2 years of treatment. Furthermore, the probability of institutionalisation increases steadily as MMSE score falls. Among our study individuals, age, race, level of education and marital status were significant predictors of institutionalisation, whereas gender had little effect. Conclusions: Using rivastigmine to treat AD results in a delay in disease progression for patients who begin treatment during the mild or moderate stages of the disease. By delaying the probability that a patient will be institutionalised, the cost of caring for AD patients can be significantly reduced. [ABSTRACT FROM AUTHOR]