Residential treatment is arguably the most costly and intensive part of the children’s mental health system. Yet, research suggests that a subset of the emotionally disordered children and youth admitted to intensive tertiary care treatment facilities fail to demonstrate symptom reductions upon discharge, with many continuing to deteriorate in their adjustment during the follow-up period. This study reports on the factors that characterize the children and youth that, while showing marginal benefit from residential treatment, continue to show community conduct problems at a two-year follow-up period. The results are discussed in the context of how knowledge of these factors can help inform future treatment and research directions.