A single site pre-post study of seriously mentally ill patients treated in a public mental health system shows that annual treatment costs can be substantially reduced with the use of day hospital treatment. Two cohorts of psychiatric patients-282 consecutive admissions to a traditional public inpatient unit in 1980, and 340 consecutive admissions to a combination of inpatient and day hospital care in 1984-were followed 12 months after admission. With the introduction of day programs into the array of treatment modalities offered, mental health policymakers have assumed that resources would flow naturally from expensive inpatient care to less expensive, community-based care. In fact, the anticipated shift in services does not necessarily occur. Many state systems operate within a fixed budget allocation, yet for the most part they have been slow to shift resources from inpatient care to alternative services. Patterns of service delivery seem to be so entrenched that they drive the public system as much as financial payment mechanisms do. Thus, structural issues must be addressed as part of the effort to shift resources from inpatient hospitalization to alternative care.A chance to reconsider these issues occurred when a state mental health facility was restructured to substitute day
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