Background There is evidence of the effectiveness of multi-professional home treatment models with regards to improving mental health for elderly patients with mental illness. However, there is a lack of studies examining the efficacy with regard to physical health. Aims To explore the effectiveness of geropsychiatric home treatment for elderly patients with mental illness with regards to improving physical health by assessing the need of physical treatment. Method A 1-year retrospective matched-pair cohort study was conducted in four regions of Austria. We compared 91 patients with a broad spectrum of mental disorders in geropsychiatric home treatment by 1:2 matching to 182 patients in treatment as usual regarding number of contacts with health services, prescriptions, hospital discharges and length of hospital stay. Results Patients in geropsychiatric home treatment showed significantly lower numbers of consultations with general practitioners (P < 0.001) and specialists (internal medicine, P = 0.022; psychiatry, P < 0.001), and lower numbers of prescriptions (medical drugs except psychotropic drugs, P < 0.001; psychotropic drugs, P < 0.004) compared with patients in treatment as usual. However, there was no significant difference in the number of hospital discharges and length of hospital stays. Conclusions Geropsychiatric home treatment has a positive effect on mental and physical parameters, which is discussed in the context of stress reduction.