This article reviewed the current challenges to the provision of residential treatment for disturbed adolescents, described the Menninger Clinic's model for short-term residential treatment that has been developed over the last 10 years to meet these challenges, and provided a case example to exemplify the role of such newly developed concepts as "mentalizing" in the provision of psychiatric treatment. Stimulated by the alarm of the costs of health care in general, residential treatment is highly scrutinized by private third-party payers and public funding sources. The impact of this movement to reduce health care costs aggressively is that lengths of stay for residential treatment of children and adolescents have been shortened and continuity of care is difficult to maintain. Since the mid-1980s,when lengths of stay began to shorten, the Menninger Clinic has worked to develop an intensive program with a length of stay of 2 to 4 months. The essential ingredients needed to ensure that treatment is effective and that treatment gains are sustained were described. Finally, a case was used to illustrate current views of understanding some of the processes that engage patients and stimulate changes in several variables.