Service Use and Costs for Persons Experiencing Chronic Homelessness in Philadelphia: A Population-Based Study

On the basis of the aforementioned criteria, 2,703 persons exhibited patterns of chronic homelessness between 2000 and 2002. Of this total, 2,434 (90.0%) persons met the chronicity criteria for shelter use only, 151 (5.6%) met the criterion for use of outreach services only, and 118 (4.4%) met both sets of chronicity criteria. Eighty-five percent of the subjects were male (N=2,298), and at the end of the study period (December 31, 2002), the mean±SD age of this group was 43±13.45 years.

Figure 1 and Table 1 show the service costs by quintile and the total annual costs for persons tracked in this study. The quintile containing the heaviest users of services by cost collectively accounted for 60% of the total costs incurred ( Figure 1 ), with an average annual cost of $22,372 per person ( Table 1 ). On average, a person who was chronically homeless used $7,455 per year in publicly funded behavioral health, corrections, and homelessness services, which totaled approximately $20 million annually for the chronically homeless population of Philadelphia for 2000–2002 ( Table 1 ).

Table 1 provides further detail regarding the sources of costs by quintile. For the most expensive quintile, 47% of the total costs tracked were for inpatient and outpatient psychiatric care. In addition, for each of the top two quintiles almost one-quarter of the total costs were from being jailed. Both as a proportion of total service use and their overall cost, psychiatric and incarceration services were used far more in these two quintiles than in the other quintiles and account for most of the overall cost differences. As the cost that each quintile represented declined, the proportions of costs for shelter use increased.

Among the 2,703 persons in the study group, 2,015 (75%) were matched to the CBH data, and among these persons 1,562 (58% of all the persons in the study group) had a diagnosis of serious mental illness or a history of substance abuse treatment. A total of 821 (53%) persons had any CBH record with a primary diagnosis of schizophrenia ( ICD-9 code 295) or major affective disorder ( ICD-9 code 296), the criteria used for serious mental illness; 1,317 (84%) had a record of substance abuse treatment; and 576 (37%) had a record of co-occurring serious mental illness and substance abuse treatment.

Table 2 shows that a large majority (81%) of the persons in the highest cost quintile had a diagnosis of serious mental illness and that a nearly equal majority (83%) of those in the lowest cost quintile had a history of substance abuse treatment without a diagnosis of serious mental illness. The prevalence of serious mental illness diagnoses among those in the highest cost quintile helps explain their exceptionally high utilization of psychiatric services. Surprisingly, the persons with a history of substance abuse treatment and no serious mental illness were prevalent in the lowest three cost quintiles.

Table 3 allows comparison of the percentages of all service units within the highest and lowest quintiles, sorted from the highest percentage of services used to the lowest. Although service utilization was expected to be higher for the highest cost quintile, the order of the services used differed for the highest and lowest cost quintiles. In addition to their extensive use of psychiatric and criminal justice services, persons in the highest cost quintile used the vast majority (81%) of the case management services used by the entire sample. Although they represent only 20% of the sample, the persons in the lowest cost quintile used a substantial amount of street services (10% of all street contacts).

This study confirmed that chronic homelessness is costly to society, with an average annual cost for behavioral health, corrections, and homelessness services of nearly $7,500 per person per year and a cumulative total of $20 million annually in Philadelphia. These cost estimates are likely to understate significantly the actual public costs of chronic homelessness, because this study did not include the costs associated with police, courts, emergency medical services, and health care not associated with behavioral health. The use of general hospital care, including emergency visits, has been found to be exceptionally high among persons experiencing homelessness ( 1, 2, 3, 4, 5, 6, 7, 9 ), and including the costs of such care would substantially increase the total cost of chronic homelessness.

In another key finding, most of the costs of chronic homelessness were associated with the relatively few heavy users of behavioral health inpatient care and jail. Alternatively, those with the least costs were heavy users of shelters. This suggests a substitution effect. But caution should be exercised in assuming that persons with lower total service costs will continue to consume services at a low rate, particularly as the homeless population of single adults ages. In the next decade, they will likely need more intensive medical supports ( 16 ).

Insofar as the promise of cost offsets associated with housing placement has inspired housing interventions targeting persons who are chronically homeless, this study provides some cautionary evidence. As has been noted elsewhere ( 5, 7 ), only the consumers with relatively higher costs of services are likely to have sufficiently high current costs to fully or mostly offset the costs of a permanent supportive housing placement, which typically costs more than $12,000 annually ( 4, 9, 17, 18, 19 ), including both operating subsidies and services. Unfortunately, it is unlikely that sufficient political will can be found to meet the ambitious federal goal of "ending chronic homelessness" without a strategy that attempts to minimize and balance costs with some degree of cost offsets, including among moderate- and lower-cost service users.

Consequently, experimentation with lower-intensity service models and less rental assistance is greatly needed. More economically efficient models of services in which the housing-specific services are transitional and the rental subsidy is permanent have been proposed, such as the critical time intervention model, which calls for transition to a community-based care system ( 20, 21, 22, 23 ). Given the reduction in the use of hospitals, jails, and shelters that this approach has been found to achieve and the exceptionally high utilization of psychiatric and correctional services found among the consumers with the highest service expenditure in this study, cost offsets appear to be likely.

For the others in the sample, however, either the expectation for budget neutrality will have to be changed, because costs would likely exceed cost offsets, or much less costly models of assistance will have to be considered and tested. One possibility is that users of lower-cost services may also need fewer services to attain housing stability. In particular, persons with primary substance use disorders and no co-occurring serious mental illness may be able to achieve housing stability with a modest rent subsidy, to be combined whenever possible with Supplemental Security Income (SSI) and with services provided through mainstream sources in the community. A modest rental assistance program for formerly homeless people with AIDS in New York City may be an important exemplar here ( 24 ), illustrating the value of both SSI and modest rental assistance for achieving housing stability for a large number of vulnerable adults, many with histories of injection drug use. A recent analysis provides further support for the model, showing that a modest rent subsidy to people with HIV was associated with significant reductions in homelessness ( 25 ). Even so, it is likely that some modest net costs would accrue.

Contrary to some notions of chronic homelessness as indicative of "service resistance," it is interesting that most people in this study were engaged in some level of services with publicly funded agencies. It is striking that these service contacts were, with the exception of street contacts at $20 per contact, more costly per unit of service (in some cases much more so) than the average cost of $22.50 per day for an efficiency apartment in Philadelphia in 2003 ( 26 ). Such a pattern suggests that a more deliberate attempt to provide housing subsidies, even subsidies that are more modest than traditional voucher programs, deserves at least equal consideration to the funding currently allocated to health and social services.

Limitations to this study include the incompleteness in data sources, such as physical health care costs and the use of supportive housing. Moreover, some of the costs per service unit were derived from staff estimates rather than paid claims. The study included only chronically homeless persons who were not accompanied by children, consistent with the federal definition at the time of this study. Consistent with prior research, we also relied on a definition of an episode of shelter use based on the 30-day exit criterion and included any persons with four or more such episodes, regardless of the total days homeless. This definition may be overly inclusive for determining chronic homelessness, because most persons with a status of chronic homelessness were so classified on the basis of having four or more episodes of shelter use. It is unclear whether for some persons this may reflect repeated but relatively incidental (not persistent) homelessness. Future research should explore the degree to which alternative definitions of an episode (requiring 60 or 90 or 120 days of absence from shelter as indicative of the end of an episode or requiring some minimal amount of shelter use) may affect the population designated as chronically homeless and the distribution of the service use profiles. Finally, it is unclear how the study results, especially low rates of service contact, may be affected by persons who moved away, died, or provided false identifying information—circumstances that could not be considered in this study.

Supportive housing models for people with serious mental illness who experience chronic homelessness may be associated with substantial cost offsets, because the use of acute care services diminishes in an environment of housing stability and access to ongoing support services. However, because persons with substance use issues and no recent history of mental health treatment used relatively fewer and less costly services, cost neutrality for these persons may require less service-intensive programs and more modest subsidies.

Support for this study was provided under a contract with the City of Philadelphia's Department of Behavioral Health Services.

The authors report no competing interests.

Dr. Poulin is affiliated with the Center for Mental Health Policy and Services Research, University of Pennsylvania, 3535 Market St., Room 3100, Philadelphia, PA 19104 (e-mail: [email protected]). Dr. Maguire is with the City of Philadelphia Department of Behavioral Health. Dr. Metraux is with the Department of Health Policy and Public Health, University of the Sciences, Philadelphia. Dr. Culhane is with the School of Social Policy and Practice, University of Pennsylvania, Philadelphia.