An attempt has been made to combine a culturally powerful incentive common to mental hospital environment and society with the motivational system of certain hospitalized psychiatric patients to effect a successful rehabilitation. This has taken the form of monetary reward for socially acceptable productive activity, which forms a bridge between hospital adjustment and "outside" adjustment. It allows the individual to set his own ultimate goals and rewards. It initiates and demands group activity for obtaining the reward. It makes the mental patient undertake normal behavior for normal rewards. At Perry Point Veterans Administration Hospital, the theory was translated to the practical application of a member-employee system under which certain psychiatric patients were discharged to work as hospital employees with monetary rewards and certain subsidiary benefits. Of 20 patients only 3 were readmitted to the hospital. Remarkable personal adjustment resulted with improvements in appearance, behavior, and self-esteem. It enabled a financial saving to the government of approximately $69,379.55 per year. It has given current occupational-therapy and manual-arts procedures a higher goal and purpose. It gives the placement officer a recent work history to facilitate his task with industrialists. It permits former mental patients to be hired on the same basis as normal individuals. It is proposed to develop the member-employee system to the point of grading hours and tasks to various levels of patient adjustment. It has proved to be a most effective intermediate extramural rehabilitation process.Abstract Teaser