Managed care organizations have become significantly involved in health care in the Denver metropolitan area. Their presence has challenged psychiatric hospitals to reduce costs and length of stay. In 1990, a locked private psychiatric unit was reorganized into locked, open, and partial care services through which patients progress at individualized rates. One treatment team manages patients in all settings, allowing a reduction in staffing costs and flexibility in treatment design. The hospital administration takes an active role in facilitating collaborative decision making between hospital clinicians and managed care representatives. In the first year after reorganization, length of stay was significantly reduced; 90 percent of patients were discharged from 24-hour care within ten days or less, whereas only 40 percent were discharged within that time in the original program. Staffing costs were reduced by 15 percent. No increase in recidivism was noted.