Cost savings from assertive community treatment services in an era of declining psychiatric inpatient use.

Assertive Community Treatment (ACT) is a mobile team-based outpatient service model for providing comprehensive psychiatric care and case management supports to persons with serious mental illnesses. Clients suitable for ACT services are severely ill and intensively use inpatient psychiatric care. For these individuals traditional outpatient services may not be adequate to prevent the need for acute care (Stein and Test 1980; Phillips et al. 2001). It has become accepted wisdom that ACT programs are cost-neutral or cost-saving (Phillips et al. 2001), a perception that may be based on dramatic reductions of psychiatric inpatient use in early experiments with ACT during the late 1970s and early 1980s (Weisbrod, Test, and Stein 1980), an era when lengthy psychiatric inpatient stays were still prevalent (Manderscheid et al. 1985). However, this perception could be outdated because of the dramatic reductions in inpatient mental health use by the population of disabled persons with serious mental illness in most state public mental health systems and the U.S. Department of Veterans Affairs (VA) health care system (Witkin, Atay, and Manderscheid 1996; Sturm and Bao 2000; Zuvekas 2001; Greenberg and Rosenheck 2010). Using data from the VA health care system, this study estimates the effects of ACT services on VA costs and inpatient mental health services utilization, examining whether cost savings from ACT were affected by a decline in VA inpatient mental health utilization. The ACT is considered one of the most effective approaches for delivering services to people with severe and persistent mental illness (Rosenheck and Neale 1998a, b; Latimer 1999; Phillips et al. 2001). ACT brings together essential services and staff members from different disciplines in order to support clients in the community rather than in inpatient settings (Bond et al. 2001). The ACT model requires a clinician team leader, normally a social worker or psychologist, as well as one or more nurses, a psychiatrist, and a substance abuse specialist (Teague, Bond, and Drake 1998). Teams maintain a low client–staff ratio (the model-specified maximum ratio is 12 : 1) and accept complete responsibility for the care of clients (Stein and Test 1980). Services are available 24 hours a day, 7 days a week, and care is fully mobile. In 2010, more than 65,000 persons with serious mental illness were enrolled in more than 800 ACT programs in 38 U.S. states and in the VA health care system (NASMHPD Research Institute, I. 2009; Neale et al. 2009). ACT services can cost from $6,000 to more than $12,000 per client annually (Latimer 1999), and clients may continue receiving ACT services indefinitely. Since the early 1980s, several evaluations have demonstrated that, despite ACT's substantial up-front costs, enrollment in an ACT program can result in lower overall mental health costs, primarily because ACT clients use less inpatient mental health care (Weisbrod, Test, and Stein 1980; Latimer 1999; Phillips et al. 2001). This body of evidence supported rapid dissemination of ACT programs into public mental health systems during the 1980s and 1990s (Richardson 1999; Veterans Health Administration 2004). Although ACT services can be cost-neutral, evidence suggested that the cost neutrality of ACT depends critically on whether programs select clients whose number of inpatient bed days immediately prior to ACT entry is sufficiently high (Rosenheck, Neale, and Frisman 1995; Rosenheck et al. 1995). This evidence influenced the VA's decision to limit entry into ACT services to patients with “high hospital use,” defined as having more than 30 inpatient mental health bed days or at least 3 inpatient mental health admissions in the previous 12 months (Veterans Health Administration 2004). The mediating impact of ACT program entrants' prior inpatient mental health use on the cost consequences of ACT may have become more salient over time as a result of the dramatic declines in use of inpatient care by persons with severe and persistent mental illness (Witkin, Atay, and Manderscheid 1996; Sturm and Bao 2000; Zuvekas 2001; Greenberg and Rosenheck 2010). These changes were driven by various factors, including widespread dissatisfaction with institutional care in state psychiatric hospitals (Geller 2000a) and states' increased use of Medicaid as a source of financing for inpatient mental health care (Geller 2000b); Medicaid generally excludes coverage for non-elderly adults' stays in “institutions for mental diseases” (Geller 2000b). As a result of these declines, ACT-related cost savings from reduced inpatient use as well as the number of potential ACT clients for whom ACT services would be cost-saving would be expected to decline. Such changes may have critical implications for public financing of ACT services and other ACT-like intensive case management models. Meanwhile, evidence on the impacts of ACT on costs and inpatient use is almost entirely based on data from experimental ACT programs rather than on “real-world” ACT programs deployed into public mental health systems. The effectiveness of ACT services could be more variable in practice than has been shown in experimental settings, because real-world ACT programs both in the VA and elsewhere do not have uniform fidelity to the ACT model (Salyers et al. 2003). Data from all VA ACT programs in fiscal years 2001–2004 (FY01–FY04) were used to examine the impacts of entry into an ACT program on newly enrolled clients' inpatient utilization and mental health costs during the first 12 months of enrollment. We examined both the average program impact and differential (i.e., marginal) program impacts for clients with greater versus fewer inpatient bed days before program entry. VA ACT clients' mental health services utilization and health care costs were compared with the services utilization and costs of a similar group of VA patients who met administrative eligibility criteria for VA ACT services during the same time period but did not enroll in ACT. To address selection bias, we combined two analytic approaches, propensity score matching (Rosenbaum and Rubin 1983; Ho et al. 2007) and instrumental variables estimation (Angrist, Imbens, and Rubin 1996; Heckman 1996; Hogan and Lancaster 2004). While propensity score matching resulted in a comparison group that was similar to ACT enrollees in terms of measured characteristics, the instrumental variables method was needed to address selection bias due to unmeasured confounders. The study's instrumental variables were based on variations in VA patients' access to ACT services during fiscal years 2001–2004, a period of rapid dissemination of new VA ACT programs.