The King's Fund and the Centre for Mental Health is calling for a reduction in the unnecessary use of hospital beds for patients with mental health problems, such as dementia, who could be more effectively cared for in the community.
A report from the organisations estimates that up to £200 million per year could be saved by reducing the unnecessary use of beds, as well as driving down the number of patients placed in facilities outside their local areas.
Additionally, the report calls for improvements in services for older people, such as reducing delays in hospital discharges for people with dementia, which could save more than £300 million annually.
"By intervening earlier and more effectively when people become unwell, and by focusing on supporting people to lead the lives they want for themselves we can also deliver good value for public funds," said Andy Bell, deputy chief executive of the Centre for Mental Health.
The King's Fund recently called for integration of care to be placed at the heart of NHS reforms.
Read more about Barchester's dementia care homes.