The National Association of Private Psychiatric Hospitals (NAPPH) recently joined with the American Association for Partial Hospitalization (AAPH) to provide mental health professionals with a clear, industry-supported definition of psychiatric partial hospitalization, an option on the continuum of care used by clinicians to treat mental illnesses. In 1988, Congress approved a major benefit change for the Title XVIII Medicare program by including reimbursement for partial hospital programs that meet a strict definition and provide a series of treatment services. As defined by Congress, partial hospitalization means an outpatient program specifically designed for the diagnosis or active treatment of a serious mental disorder when there is a reasonable expectation for improvement or when it is necessary to maintain a patient's functional level and prevent relapse or full hospitalization. That definition and the service components are endorsed by NAPPH and AAPH, and they offer a model for other insurers or employers considering the addition of this highly specialized program to healthcare benefit plans. Partial hospital programs are usually furnished by a hospital as a distinct and organized intensive ambulatory treatment service of less than 24-hour daily care. Partial hospitalization is not a substitute for inpatient care. For some patients, the availability of partial hospitalization may shorten the length of stay of full hospitalization or serve as a transition from inpatient to outpatient care. It may allow some patients to avoid hospitalization. Placement in a partial hospital program is a clinical decision that can be made only by a physician thoroughly knowledgeable about the patient's illness, history, environment, and support system.