: Care of stroke patients costs considerably more in specialized stroke units (SU) compared to care in general medical wards (GMW) but the technology may be cost effective if it leads to significantly improved outcomes. While randomized control trials show better outcomes for stroke patients admitted to SU, observational studies report mixed findings. In this paper we use individual level data from first-ever stroke patients in four European cities and find evidence of selection by the initial severity of stroke into SU in some cities. In these cases, the impact of admission to SU on outcomes is overestimated by multivariate logit models even after controlling for case-mix. However, when the imbalance in patient characteristics and severity of stroke by admission to SU and GMW is adjusted using propensity score methods, the differences in outcomes are no longer statistically significant in most cases. Our analysis explains why earlier studies using observational data have found mixed results on the benefits of admission to SU.