Case management has become an established organizational approach to mental health care. However, a recent development of case management, known as 'managed care' has received only limited attention in the UK and this has been confined to acute medical or surgical hospital care. The potential of managed care as applied to mental health care is uncertain. This paper clarifies the nature of managed care and discusses its relevance to mental health care, in particular to the care of people suffering from schizophrenia. The high incidence and heavy resource demands of this user group makes these people an ideal focus for managed care. However, there are conceptual and practical problems hindering its development and implementation, including: the variability and unpredictability of the disease process of schizophrenia; challenges of outcome measurement; and problems relating to the current organization of mental health care.