Impact on Psychiatric Facilities

States and counties continue to look for ways to minimize costs in providing mental health services. They are turning to managed care organizations to replace the relatively more expensive fee-for-service arrangements for institutional care, despite the problems that often entails. The change to managed care has been under way for several years. At least 15 states have waivers from the federal government allowing them to enroll their Medicaid population in privately owned managed-care programs.

The impact of managed care on psychiatric facilities is clear. Treatment dollars are being cut and hospital care is reduced. There are large reductions in the institutional workforce as the number of inpatient beds have shrunk and lengths of stay have been shortened.

According to a recent survey conducted by the National Alliance for the Mentally Ill, the managed care industry has largely failed to provide adequate treatment to those individuals with serious mental illness in the following ways:

• Hospital care is strictly limited, sometimes to what amounts to criteria for involuntary commitment. Most managed care companies do not specify that a qualified physician is required to deny hospitalization. And many providers surveyed described policies in which hospital care is denied for patients who are noncompliant and disruptive--common features of severe mental illnesses.
• Few companies unequivocally support the use of new antipsychotic medications as a first line of treatment.
• Barriers to access are apparent for most facilities.
• Few companies define suicide attempt as a medical emergency or provide the resulting policies that would ensure immediate care.
• Promises to involve consumers and their families in managed care is mostly rhetoric and not reality. The industry overall has failed to completely engage patients and their families in their own treatment planning, in education about the illnesses, and in providing feedback and oversight to the managed care organization.
• All of the managed care organizations profess outcome measurements and most say they have a process to feed that information back into their systems of care. None, however, are systematically examining key outcomes for people with serious brain disorders and their families. And at the present time, consumers, families, and purchasers would be unable to identify the company providing the best care to people with severe mental illnesses on the basis of their outcomes performance.
• Most of the companies refuse to take responsibility for ensuring that people disabled by severe mental illnesses have an adequate and stable place to live and are receiving rehabilitative services that are necessary for employment and self-sufficiency.

The Role of the State Psychiatric Hospital

Many states have taken an all-or-nothing approach to facility closures and the privatization of their operations. Managed care is also steering more and more mentally ill people into community-based services. However, state psychiatric hospitals continue to occupy a critical niche in the community. The growth of community-based services in this country has failed to eliminate the need for these institutions. Community-based programs have not shown that they possess the full array of services needed for all mentally ill people, nor have they shown the inclination to provide them.

State mental hospitals can fulfill an amazing array of functions. Not only do they typically monitor the course of illness among severely mentally ill individuals, they also provide psychiatric treatment, medical care, short- or long-term asylum, residential care and crisis intervention. Although all state psychiatric hospitals may not provide all of these services, in many places, they may well be the only facilities that provide even the most basic care and asylum to persons in grave need of assistance.

In her analysis of state psychiatric hospitals entitled, "The State of the State Mental Hospital in 1996," Leona L. Bachrach states that it is more than the patient who is served by state mental hospitals. "For their relatives, the hospital may provide much needed respite and relief, as well as education and support. For the system of care, it may provide a venue where those individuals who appear to be most difficult to reach may be engaged in treatment. For the professional community, the hospital may afford unparalleled opportunities for research and training. For society, it may serve as a place for segregating and confining dangerous individuals. And for local communities, particularly those located in rural areas, the state mental hospital may provide a tax base and a critical locus of employment."

This partial listing of state hospital functions show that most facilities are more than merely a place for psychiatric and medical treatment, a place of detention, or merely a residential site for severely ill individuals. Bachrach goes on to say that "although community-based agencies in some places have performed one or more, perhaps even all, of these functions with notable success, no single class of service entities has yet been able to match the state hospital for multifunctionality."

Finally, turning public hospitals over to managed care has not uniformly resulted in cost savings, as is commonly believed. In many instances cost shifting may be a clearer picture of reality than cost savings, for the comprehensive care of severely mentally ill individuals tends to be expensive no matter where it takes place.1

As Thornicroft and Bebbington2 have noted, the more comprehensive and methodolog-ically sophisticated a cost analysis is, the less certain it appears that community-based services are cheaper than those provided in mental hospitals.

To date, there are approximately 77,000 people who continue to reside in state mental hospitals on any given day. Some critics regard this as excessive and feel that the community-based programs are not expanding rapidly enough to absorb this population. Others, like AFSCME, are viewing with alarm the growing populations of poorly served or totally unserved mentally ill individuals in our jails and on the streets, and believe that public institutions should be available to accommodate the needs of individuals who are largely overlooked in today’s patchwork system of care.

States continue to seek ways to cut costs by privatizing their psychiatric facilities under a managed care arrangement. A few places have dealt with this problem by simply closing the hospitals without directing the savings to community services.

This is just "smoke and mirrors" because ultimately everybody pays. The patient pays because he/she does not receive the full range of services required. Mental health workers pay because reductions in funding result in lower wages and benefits. The community programs pay because they experience high turn-over and little continuity in treatment services for the client. The taxpayers pay because they have to bear the cost of the resulting medical and mental healthcare in the hospitals’ emergency rooms, the cost of maintaining mentally ill persons in prison, and the social cost of the mentally ill in the homeless population.

AFSCME Public Policy Department
August 1998

Notes

1. Cane, CF: Deinstitutionalization and Managed Care: Deja Vu?; Psychiatric Services; 1995.

2. Thornicroft, G., Bebbington, P.; Deinstitutionalization: from hospital closure to service development. British Journal of Psychiatry; 1989.