Long-term institutionalization is no longer the preferred treatment for the severely mentally ill. Several models for outpatient treatment of the severely mentally ill have been developed, among them Assertive Community Treatment (ACT). The literature on this model is reviewed in a Cochrane review and in randomized trials comparing ACT with hospital admission. ACT is a clinically effective approach to managing the care of severely ill people in the community. ACT, if correctly targeted on high users of in-patient-care, can substantially reduce costs of hospital care whilst improving outcome and patient and relatives satisfaction. Setting up ACT teams should be supported by politicians, professionals and consumers.