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The Politics of Cost Comparisons

Advocates for closing public hospitals that treat persons with mental illness and developmental disabilities often use misleading cost comparisons indicating that it is much more costly to operate state facilities than to fund community-based services. State hospitals are easy targets because their costs are easily quantifiable. As the number of patients falls, the per patient cost increases both because “fixed overhead” is spread over fewer patients, and the patients that remain are the most seriously ill or disabled. By contrast, “community services” are spread over many budget lines, and across several departments within state and local governments. Moreover, the hidden costs to the correctional system are usually overlooked.


Describing Kansas' experience with closing state psychiatric hospitals and creating community-based alternatives, the president of the Mental Health Association of the Heartland said, "What they're finding is that not only is it not cheaper than running state hospitals, but it is actually more expensive."


Finally, some advocates and researchers are beginning to concede that community-based care does not result in cost savings for state and local governments — especially if it is done properly. Describing Kansas’ experience with closing state psychiatric hospitals and creating community- based alternatives, the president of the Mental Health Association of the Heartland said, “What they’re finding is that not only is it not cheaper than running state hospitals but it is actually more expensive.”17 In Johnson County, Kan., 10 percent of the clients served by the Johnson County Mental Health Center account for nearly half of its $14 million budget. Each “wave” of patients released from the state hospital is more costly, more afflicted, and harder to place in the community than the preceding one.

Recent studies indicate that private psychiatric hospitals are dumping patients out of their facilities with increased frequency. Dumping appears more widespread in areas where there are more for-profit psychiatric hospitals, and less inpatient capacity in the public sector.18 When researchers attempt to compare costs of patients who have the same severity of illness, they often find no savings from moving these patients from state hospitals to community settings. A 1998 study of the impact of the closure of Philadelphia State Hospital on costs concluded that the direct treatment cost of an episode of care increased, as did the annual cost of care per patient, because former Philadelphia State Hospital patients were simply being hospitalized with acute episodes in private hospitals, with the bill paid by the county.19

 

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