This study evaluates the effect of Maryland's Medicaid managed care program on patterns of psychiatric readmission for adolescents. Rates and frequency of readmissions are compared before (FY 1997) and after (FY 1998) the implementation of Maryland's Medicaid managed care program. Medicaid claims files were reviewed for 881 adolescents consecutively admitted to three major Maryland psychiatric hospitals between July 1, 1996 and June 30, 1998. Adolescents admitted after the managed care reforms were more likely to experience multiple readmissions. The 1-year cumulative rate of readmission pre- and postmanaged care was 33% and 38%, respectively; the highest risk period fell within the first 15-30 days postdischarge. The high rate of early readmissions raises concern about the quality of care and the adequacy of community-based services. Findings also suggest that youths with serious emotional disturbances who are high users of inpatient care may be adversely affected by the managed care reforms.