Who should receive high-cost mental health treatment and for how long?

The use of some recently developed and promising mental health treatments is likely to be restricted by their high cost. Cost-effectiveness studies, however, suggest that high treatment costs may be offset by associated reductions in inpatient service use. In view of the considerable variation in the cost of inpatient treatment for the mentally ill, it may be cost-efficient to use high-cost treatments for frequent hospital users but not for others. To illustrate this principle, we examine 9-year trends in inpatient costs incurred by schizophrenia patients discharged from Department of Veterans' Affairs medical centers across the country in fiscal year (FY) 1982. Even in the absence of specific intervention, average inpatient costs in this sample fell 49 percent, from $7,368 per patient in FY 1983 to $3,770 per patient in FY 1990, reducing the potential for inpatient cost offsets over time. Sensitivity analyses of potential inpatient cost offsets were conducted using a range estimate both for the cost of treatment and for resulting reductions in inpatient expense. Assuming effectiveness in a middle range, high-cost intervention was projected to be cost-neutral for the 25 percent of the sample with the highest rates of baseline hospital use for a duration of 1-3 years. Although our specific model had low predictive power, the projection of cost offsets in large mental health systems deserves further examination and may prove to be one useful criterion, in addition to clinical effectiveness, for selecting patients to receive expensive treatment.