Managed healthcare has had a major impact on the delivery of alcohol and drug abuse treatment services in the private setting, primarily by shifting patient enrollment from inpatient to outpatient treatment programs. The purpose of this study was to investigate the natural history of outpatient alcohol and drug abuse treatment in a private, nonprofit healthcare setting. Patient profiles at pretreatment, their attendance record in a 6-week outpatient program, and their outcome in the year after treatment were evaluated in 120 patients with a DSM-III-R diagnosis of alcohol and/or cocaine dependence. There were 70 outpatients who successfully completed the program, and 50 who did not. Two subtypes of outpatient treatment failures were identified: S5 who prematurely left treatment against medical advice (n = 23), and S8 who attended treatment but continued heavy use of substances (Treatment Resistant, n = 27). A logistic regression revealed that younger age, multiple prior treatments, and employment problems were related to outpatient treatment failure. Outpatient failures did not immediately seek alternative treatment, and most of them continued heavy substance use in the year post-treatment: i.e., 82% vs. 43% successful completers (chi 2 = 13.8, df = 1, p < 0.01). Thus, there were a clinically relevant number of outpatient failures (42%), either because of lack of program attendance or continued substance use throughout treatment. These behaviors were related to continued heavy use of substances in the year after treatment.