Inpatient psychiatric care accounts for a major part of the health care dollars spent for mental illness. In this article the authors review the history and literature behind the process of psychiatric peer review and quality assurance and discuss the development of standard criteria for admission to the hospital. These criteria include (1) imminent danger to oneself and others, (2) acute impairment of ability to perform activities of daily life, (3) impulsive or assaultive behavior, and (4) management of withdrawal states. The authors then present an outline of the typical course of the hospital stay. Finally, through a series of questions, criteria for continued stay on an acute care unit are indicated. The essential criterion is medical necessity based on a standard of severity of illness and intensity of treatment required. Criteria for admission, a sense of the typical course of the hospital stay, and criteria for continued stay then become the relevant issues for psychiatric peer review and quality assessment.