The psychiatric health facility (PHF) is a new kind of California health facility licensed for psychiatric inpatient treatment. PHFs provide acute short-term treatment in nonhospital settings that have more flexible facility and staffing requirements than do hospitals. The enabling legislation states that the average per diem cost should be approximately 60 percent of the cost of similar services provided in a general hospital. In late 1985 one private and 16 public PHFs were operating in California. The number of applicants wishing to open private-sector PHFs continue to increase, partly due to recently mandated insurance coverage for the facilities. Data on existing PHFs show that the characteristics of patients in PHFs and general hospitals are similar, and that state hospital utilization for counties using PHFs is lower than for non-PHF counties.