Current problems in substance abuse treatment include poor treatment outcomes, difficulty in recruiting and retaining treatment staff, and the failure of treatment programs to adopt effective research innovations. These problems can be addressed by the application of a two-stage strategy that will first provide strong incentives for providers to demonstrate positive outcomes; and second, provide strong incentives to increase the cost-effectiveness of treatment. Treatment programs should also adopt a standard set of measures that will be used to determine effectiveness. State agencies, regional health alliances, or insurance companies should oversee and manage this system. This proposed system of managing substance abuse services may produce several problems, however. These may include the premature adoption of novel treatment regimens, the fabrication of treatment results by unscrupulous providers, and the development of competition instead of cooperation among treatment providers. These problems can be controlled. The benefits of such a system would be improved programs and outcomes as well as incentives to encourage continued innovation and efficiency. The application of managed market forces may ultimately render a clearer connection between process and outcome in substance abuse treatment. 41 references