Although the process of national health care reform has slowed, state-based reform initiatives and market forces driven by managed care are dramatically reconfiguring the health care environment. This decentralized process of health care reform poses numerous threats to academic departments of psychiatry, which must develop strategic plans to cope with the changes. The authors outline the effects of health care reform on clinical service, education, and research and discuss strategies of response in each domain, including examples from their department at Yale University. An active response to health care reform provides academic departments of psychiatry an opportunity to participate in shaping the future of psychiatry while reorganizing their teaching and research programs.Abstract Teaser