In California multiple social forces and financial constraints are leading to the rapid development of local alternatives not only to state hospitals but to general hospital psychiatric units as well. Two dissimilar patterns of acute-care services are emerging: the use of skilled nursing facilities with additional staff to provide mental health services and the development of a wide range of primarily nonmedical facilities under the licensing category of "residential care facility." The author summarizes characteristics of both kinds of programs and describes how they draw on all available sources of revenue before using state and county mental health funds. He also describes Santa Clara County's plan for local acute-care services in which a 54-bed residential building and a 15-bed psychiatric unit in a county hospital will replace two county-hospital psychiatric wards.