Objective — To review the relevant literature on the effects of reductions in long stay beds on mental health services in the UK. Method — A selective literature review, with particular reference to research conducted by the author and colleagues at The Sainsbury Centre for Mental Health.Results — The evidence suggests that the effects of long stay bed reductions should be examined with regard to 'old' and 'new' long stay patients separately. While the 'old' long stay who have been most directly effected by these changes have generally fared well; the 'new' long stay have not. They are currently accumulating in acute inpatient units, often on general hospital sites, or are rotating in the 'revolving door' of acute inpatient care and inadequate community supports. Although it is clear that there is a shortage of acute beds especially in inner city areas many of the these beds are currently occupied by patients who would be better (and less expensively) cared for in community alternatives if these were available. The evidence suggests that it is possible to im-prove outcomes for this 'new' long stay group if specific kinds of housing, work and assertive community teams are provided. Conclusions — It is concluded that the effects of long stay bed reductions should be considered in a 'systems perspective'. Effective community services can be established, but in order to achieve effective substitution of one kind of service for another, there must be a well co-ordinated, clearly targeted, and technically efficient system. At the present time such services are rare. However, simply focusing on one element (e.g. beds) is unlikely to produce cost effective and efficient solutions.