A variety of factors are putting great pressure on residential treatment centers to justify their role in the child serving system through evidence of impact on the lives of children, youth, and families. The present study describes the role of residential treatment from an outcomes perspective in a midsized state over the course of a 5 year period in which efforts were made to reduce out-of-community placements. The process of developing a system of care approach to the child serving system while matching children and youth needs to the use of residential treatment resulted in placing more challenging children and youth in these placements over time. The results of this process included an improvement in within-episode outcomes from residential treatment. A hinge analysis in which children and youth were described using a common assessment before and after placement in a range of treatments/programs helped explicate the role of residential treatment serving the most challenging children and youth successfully. The necessary length of stay for residential treatment from a clinical perspective depends greatly on the continued treatment options post-discharge. (Contains 12 figures and 3 tables.)