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The aim of this research was to investigate the administrative decision to place a drug court participant in an intensive vs. non-intensive treatment setting as a possible independent influence on program failure and re-arrest. Our strategy was to test treatment modality as a mediator of drug court failure and re-arrest, controlling for risk level as indicated by a set of established predisposing static factors. Demographic, criminal history, program failure, and re-arrest data were collected from 400 New York City drug court participants. Risk scores were created for program failure and re-arrest by performing logistic regressions on criminal history and demographic predictors of these outcomes. Controlling for prior risk, placement in an intensive (vs. non-intensive) treatment setting predicted higher rates of program failure and re-arrest. Intensive (vs. non-intensive) placement marginally mediated the impact of risk on failure, and significantly mediated the impact of risk on re-arrest. Notably, residential placement doubled the rate of re-arrest for those at low, but not moderate or high, risk. Findings support a “least-restrictive” approach to treating low-risk drug court participants, and the use of validated risk assessments. That is, over-estimating low-risk offenders’ propensity to recidivate can lead to an overly restrictive, and iatrogenic, treatment placement decision.