An important effect of managed care is keeping partially decompensated patients out of the hospital, for this is the single most decisive factor in cutting the costs of psychiatric services. It is proposed that discharging sicker patients from inpatient units and denying admission to poorly compensated patients poses new challenges to their outpatient therapists. This calls for new, refined psychotherapeutic skills, especially around the development of a therapeutic alliance. Patient communications in the form of metaphors may help the clinician understand the patient's conflicts while avoiding excessive anxiety that might accompany more direct communications. Recognizing the meaning of the metaphor and working with it can keep the patient from regressing and assist in the formation of a therapeutic alliance. This statement is examined in a number of clinical examples. The similarities and differences between metaphors and dreams, symptoms, and the transference are discussed.