I think I would be more concerned with what is going on to cause the self-harm rather than the self-harm itself unless it becomes a life-threatening issue. Have you guys been able to come up with alternate coping methods? Are the underlying issues being addresses? Do you feel your therapist is warrented in his concern over the increasing self-harm? I know mine goes very quickly from "this is somethign that helps me get through the day" to "oh ****, I really need help with containment". Knowing that about me, I could understand if my therapist confronted me with a similar ultimatum, though I would hope that she would try to help me find alternate coping skills. The only thing hospitals really do is physical containment. While that's very much needed at times, it rarely helps chronic self-harm because it doesn;t address what's going on underneath. I hope you will be able to talk to your T about your concerns with his stance. Maybe you guys could come to a better understanding. If that doesn't help, maybe it would be a good idea to look for another T?