Objective: To identify the proportion of residents in Alberta's psychiatric hospitals who would be relocatable to community-based alternatives to care if appropriate programs were made available. Methods: A survey of a representative sample of residents in all psychiatric hospitals and care centres was undertaken, excluding patients in specialized programs for forensic psychiatry, brain injury, and substance abuse. Results: Findings indicate that 11% of institutionalized patients could be considered good candidates for relocation to community-based alternative care. A further 35% were considered to have potential for relocation provided an intensive and complex array of services was first made available. Conclusion: Results support a phased-in approach to hospital downsizing and the need for considerable transitional funding. Because hospital downsizing is unlikely to save dollars, at least in the short term, reforms must remain guided by humanitarian motivations to improve quality of life for persons with severe and persistent mental illnesses.