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The purpose of this chapter is to apply structural functional theory and the concept of “unbundling” to an analysis of the deinstitutionalization and community mental health efforts that have shaped the current mental health services environment.

We examine the original goals of the institutional movement, the arguments supporting it, and the functions of the institutions that were created. We then examine the criticisms of that approach and the success of the subsequent deinstitutionalization process, which attempted to undo this process by recreating the hospitals’ functions in community settings. Finally, we address the question of whether the critical functions of psychiatric institutions have indeed been adequately recreated.

Our overview of outcomes from this process suggests that the unbundling of state hospital functions did not yield an adequate system of care and support, and that the functions of state hospitals, including social control and incapacitation with respect to public displays of deviance were not sufficiently recreated in the community-based settings.

The arguments for the construction of state hospitals, the critiques of those settings, and the current criticism of efforts to replace their functions are eerily similar. Actors involved in the design of mental health services should take into account the functions of existing services and the gaps between them. Consideration of the history of efforts at functional change might also serve this process well.

The original ‘plan’ for deinstitutionalization of America's population of persons with severe and persistent mental illness saw community mental health services as providing many of the functions of large mental hospitals in community settings. While substantial effort and resources have been committed to this enterprise, many persons with mental illness encounter significant problems in adjusting to life in the community. Prominent among these problems is the disproportionate involvement in the criminal justice system of persons with psychiatric disorders. This problem, popularly described as the ‘criminalization’ of mental illness, often threatens the clinical stability and safety of persons with mental disorders, and at the same taxes heavily the resources of the criminal justice system. This paper reviews data exploring the relationship between levels and availability of community-based services and the likelihood that persons with mental illness will become involved with the criminal justice system. Finding no relationship, we conjecture that community mental health services are effective with only certain individuals, and move toward a taxonomy of offenders with mental illness. This classification scheme takes into account the relationship between psychiatric disorder, lifestyle and pre-morbid criminal involvement, and is designed to inform system actors with regard to the targeting of these resources.