The Impact of Closing a State Psychiatric Hospital on the County Mental Health System and Its Clients

OBJECTIVE: This three-year study examined the impact of closing a state psychiatric hospital in 1991 on service utilization patterns and related costs for clients with and without serious mental illness. METHODS: The cohort consisted of all individuals discharged from state hospitals and those diverted from inpatient to community services and enrolled in the unified systems project, a state-county initiative to build up the service capacity of the community system. The size of the cohort grew from 1,533 enrollees to 2,240 over the three years. Information on the types, amounts, and cost of all services received by each enrollee was compiled from multiple administrative databases, beginning two years before enrollment and for up to three years after. The data were analyzed to reveal patterns of and changes in service utilization and related costs. RESULTS: Replacement of most inpatient services with residential and ambulatory services resulted in significant cost reduction. For project enrollees, a 94 percent reduction in state hospital services resulted in cost savings of more than $45 million during the three-year evaluation period. These savings more than offset the funds used to expand community services. Overall, the net savings to the system for mental health services for this group was $3.4 million over three years. CONCLUSIONS: The hospital closure and infusion of funds into community services produced desired growth of those services. The project reduced reliance on state psychiatric hospitalization and demonstrated that persons with serious mental illness can be effectively treated and maintained in the community.