In Maryland a six-month fiscal incentive to promote nursing homes' acceptance of chronic patients discharged from state psychiatric hospitals was evaluated after one year. During the fiscal year of the incentive program, such placements (N=182) increased an average of 38 percent from previous years. Of 163 patients whose placements were evaluated, 22 were returned to the state hospital during the six-month period that the incentive was in place. Ten of the 22 were returned within 30 days of placement. Contrary to expectation, the return rate did not rise after the incentive was discontinued; four patients were returned during the second six months of the study period. Most returns during the first six months were due to patients' physical and verbal threats. The results supported the use of shortterm fiscal incentives and emphasized the importance of intensive supportive interventions with chronic mentally ill patients early in the nursing home placement.