Clinical experience has shown that short-term hospital treatment is inadequate for some severely disturbed children and adolescents and, in fact, may exacerbate their dysfunction. The author analyzes the dynamics of the treatment process and presents case examples to suggest that treatment of these children should be based on developmental needs rather than on short-sighted economic expediency. A developmentally based treatment approach requires the maintenance of institutions that can provide comprehensive, integrated, and extended treatment, as well as an environment for research on severe psychiatric disturbances.