Quality / capacity substitution in the delivery of mental health care

Abstract

This paper stresses chronicity as an essential aspect of mental illness, and develops an analysis of the mental health services delivery problem in which chronicity plays a central role. This emphasis leads in turn to a discussion of the importance of "treatment quality" in determining long run health care costs. The paper focusses on two sources of inefficiency in the mental health services system: the possibility that there are local optima in services delivery cost functions, and the fact that separately-managed treatment centers are interdependent because the treatment practices of one affect the patient flows of others. A formal analysis of these problems is provided, supplemented by a simulation model that can provide a much more detailed description of outcomes and costs. Finally, there is a short discussion of the use of subsidization to offset the effects of interdependence.