The idea that the deinstitutionalization of state psychiatric centers has resulted in increased utilization of general hospitals and correctional facilities by people with severe and persistent mental illness is widely held. This hypothesis of trans-institutionalization was tested by examining hospitalization and incarceration rates of people who had been or would be institutionalized in state psychiatric centers in 16 upstate New York counties. The results do not support the hypothesis of trans-institutionalization. Assumptions underlying the hypothesis are examined, potential explanations for the observed patterns are discussed, and areas for further research are suggested.