The reduction in state hospital populations in the last two decades is most often attributed to psychotropic medication and community mental health centers. The role the proprietary nursing home has played in this reduction has not been adequately studied. Using data routinely collected for Medicaid utilization review, we studied characteristics of psychiatric nursing home patients in Utah. One third of the nursing home patients had a psychiatric diagnosis; more than half of this group were classified as psychotic. Most psychotic patients were significantly younger than their nonpsychiatric counterparts. Nonpsychiatric patients received a higher mean number of psychoactive drugs than did psychiatric or mentally retarded patients. Over time, all groups of patients showed an increase in prescribed psychoactive medication and a decrease in activity. The consequence of this pattern of care raise serious questions about our current reliance on nursing homes for the care of the psychiatric patient.