Increases in Inpatient Psychiatry Beds Operated by Systems, For-Profits, and Chains, 2010–2016

Concerns about the adequacy and quality of mental health resources in the United States have been long-standing (1, 2). Reports describe closures of inpatient psychiatric care facilities, but psychiatric hospitals are also targets for acquisition by private equity investors, systems (i.e., organizations that provide inpatient and outpatient services), and psychiatric hospital chains (i.e., organizations that own two or more freestanding psychiatric hospitals) (3). Little is known about how the structural characteristics of inpatient psychiatry have changed, especially since passage of the Patient Protection and Affordable Care Act (ACA) in 2010.

We used a novel national database developed by members of the research team to examine changes from 2010 to 2016 in the quantity of psychiatric facilities and beds and to classify the psychiatric beds in terms of system ownership, profit status, facility type (freestanding or general acute care), and affiliation with chains. We also explored changes in hospitals and beds across service characteristics and regions.

Methods

This descriptive study of longitudinal data on hospitals and health systems used the Health Systems and Provider Database (HSPD) (4). The HSPD is a novel database developed by the National Bureau of Economic Research Center of Excellence on Comparative Health Systems that seeks to provide a census of all hospitals and systems within the United States (4). One of the unique features of the HSPD is its identification of health systems using a large and diverse set of sources, including data on Medicare provider enrollment, affiliation with chains, and ownership systems as well as Internal Revenue Service filings for tax-exempt entities.

Hospitals were considered to provide inpatient psychiatry if they indicated providing such services in one of the key databases. Hospitals were considered system owned if their organizational entity owned at least one general acute care hospital and had at least 50 total physicians and 10 primary care physicians (4). Hospitals were considered to be part of a psychiatric chain if their organizational entity owned at least two freestanding psychiatric hospitals. Systems and chains were not mutually exclusive. Key hospital characteristics were psychiatric bed count, hospital ownership (system-owned, non–system-owned), hospital profit status (for profit, not for profit, public), hospital type (freestanding psychiatric, general acute care), and chain ownership (common ownership with at least two freestanding psychiatric hospitals). Secondary characteristics included treatment of forensic psychiatric patients, provision of outpatient psychiatric care, provision of substance use disorder treatment, size (<10, 11–20, 21–30, 31–50, >50 beds), having an emergency department, rurality, and region (Midwest, Northeast, South, West).

We first calculated overall net changes in the percentage and number of psychiatric facilities and beds from 2010 to 2016 and then examined changes in beds by system ownership, profit status, hospital type, and affiliation with chains. We also examined changes in facilities and beds in terms of service characteristics and region from 2010 to 2016. Because the data represented a census and not a sample, we provide point estimates only. All analyses occurred between August 2019 and June 2021. The institutional review boards of Boston Children’s Hospital and Harvard University approved this study.

Results

Between 2010 and 2016, the number of hospitals providing inpatient psychiatry declined by 0.2% (N=4 hospitals; 1,787 in 2010 and 1,783 in 2016), and the number of psychiatric beds declined by 0.9% (N=998 beds; 112,182 in 2010 and 111,184 in 2016) (see part A in the online supplement). However, the number of beds operated by system-owned and for-profit hospitals changed substantially. The number of beds operated by system-owned hospitals increased by 39.8% (39,689 in 2010; 55,492 in 2016), whereas the number of those operated by non–system-owned hospitals decreased by 23.2% (72,493 in 2010; 55,692 in 2016) (Table 1; see part A in the online supplement). In terms of profit status, the number of beds operated by for-profit hospitals increased by 56.9% (15,059 in 2010; 23,631 in 2016), whereas the number operated by not-for-profits decreased by 5.4% (36,032 in 2010; 34,098 in 2016) and the number of those operated by public hospitals decreased by 10.7% (47,850 in 2010; 42,719 in 2016). In 2010, 13.4%, 32.1%, and 42.7% of beds were owned by for-profits, not-for-profits, and public facilities, respectively. This composition changed to 21.3%, 30.7%, and 38.4% by 2016.

In general, the number of beds in system-owned hospitals increased across all profit statuses and hospital types (Table 1). For-profit hospitals experienced 39.9% and 143.7% increases in the number of system- and non–system-owned freestanding beds, respectively, and a 27.2% increase in system-owned general acute care psychiatric beds, whereas the number of non–system-owned general acute care hospital beds declined by 34.6%. Not-for-profit hospitals experienced a 38.4% increase in the number of system-owned freestanding beds and a 28.5% increase in the number of system-owned general acute care beds, with 36.3% and 68.6% declines in non–system-owned freestanding and non–system-owned general acute care beds, respectively. Similarly, public hospitals experienced a 253.8% increase in the number system-owned freestanding beds and a 12.2% increase in system-owned general acute care beds, with 25.2% and 48.5% declines in both non–system-owned freestanding and non–system-owned general acute care beds, respectively.

From 2010 to 2016, the number of beds that were part of chains increased by 16.7% (N=6,256) (see part B in the online supplement). The proportion of chain-owned beds that were for profit increased by 32.5% (N=5,862), whereas the proportion that were not for profit and public declined. Trends for facilities were similar. In 2016, most for-profit beds were owned by chains (N=16,587, 70.2%) and systems (N=14,495, 61.3%). Only 11.2% (N=3,803) of not-for-profit beds were owned by chains, and 81.1% (N=27,659) were owned by systems. Most public beds, in comparison, were owned by chains (N=23,331, 54.6%) but not systems (N=13,272, 31.1%).

Last, there were changes in service and regional characteristics. The number of facilities and beds providing care to forensic patients increased by 19.4% (N=26) and 11.2% (N=2,670), respectively, with a majority concentrated among systems (see part C in the online supplement). The number of facilities and beds affiliated with an onsite emergency department increased by 88.9% (N=563) and 83.3% (N=20,422), respectively. The number of facilities and beds affiliated with onsite outpatient psychiatric care also increased by 30.4% (N=205) and 25.1% (N=10,076), respectively. There were no meaningful increases in the number of facilities and beds providing substance use disorder treatment overall, but there were considerable increases among freestanding facilities. The greatest declines in the number of facilities and beds were concentrated among hospitals with few psychiatric beds (<10 beds), and the greatest growth occurred among hospitals with many beds (>31 beds); this trend was most pronounced among freestanding facilities. There were also regional differences, with the Northeast experiencing the greatest overall decline in the number of facilities and beds but the greatest increase in system ownership.

Discussion and Conclusions

Although the overall number of psychiatric facilities and beds in the United States remained stable from 2010 to 2016, the types of hospitals delivering these services shifted. The number of psychiatric facilities and beds operated by for-profit companies increased substantially, especially beds in freestanding psychiatric hospitals. In 2010, about 13% of beds were for profit, compared with 21% in 2016. The number of psychiatric beds owned by systems also increased across all profit status categories, with the largest relative increases occurring among for-profit and public hospitals. In 2010, only about 35% of beds were system owned, compared with 50% in 2016. However, although the rise in system-owned beds was countered by declines in non–system-owned beds for both not-for-profits and public facilities, for-profits experienced substantial increases in both system- and non–system-owned beds. The proportion of hospitals owned by chains and for-profits also increased from 2010 to 2016. In 2016, most for-profit and public beds were owned by psychiatric hospital chains, compared with a small fraction of not-for-profits. The number of hospitals and beds providing treatment for forensic patients, as well as those affiliated with onsite outpatient psychiatric care and an emergency department, also increased overall. Surprisingly, despite the opioid epidemic occurring during the study period, the number of hospitals and beds providing substance use disorder treatment increased only modestly.

The rise in for-profit beds is likely the result of different but potentially related forces. First, the prevalence of mental illness and suicidality has been rising in the United States (5, 6). Second, there was increased insurance coverage for the behavioral health population and behavioral health services after provisions of the Mental Health Parity and Addiction Equity Act and the ACA (7, 8). Third, health care organizations that specialize in psychiatric care, such as system-owned freestanding psychiatric hospitals and chains, might have the financing and expertise needed to capitalize on increased demand and insurance coverage while also being able to offer services more efficiently because of economies of scale. Moreover, psychiatric facilities that also provide outpatient care can direct referrals within their system, and system-owned facilities that are freestanding might have greater capacity to exercise preference over the patients they admit. Indeed, although the largest relative increase among for-profits occurred among non–system-owned freestanding facilities, the largest absolute increase occurred among system-owned freestanding facilities.

The dominance of for-profit chains observed in this study is not without precedence. Levenson (9) described increases in the number of for-profit freestanding psychiatric hospital chains in the 1980s. Levenson estimated that there were 198 private freestanding psychiatric hospitals owned by chains in 1982; for-profits owned 65% of them. In our study, there were 286 private freestanding psychiatric hospitals owned by chains in 2016, with about 80% (N=225) of these facilities owned by for-profits. From 2010 to 2016, overall chain ownership increased, with a considerable shift toward for-profits. These trends warrant concern. Several investigations have focused on the largest supplier of psychiatric beds in the country (a system-owned for-profit chain) obtaining profits at the expense of quality and engaging in fraudulent activities (e.g., admitting patients when not medically necessary) (2). Empirical work documenting quality differences by profit status in both inpatient psychiatric and residential substance use disorder treatment is beginning to be published (10–12). However, a critical need remains for empirical scrutiny of inpatient psychiatric care in general and how it varies across facility characteristics.

The more blunted trends in beds observed in general acute care hospitals across all profit status categories might be related to the view among general acute care hospitals that inpatient psychiatric care is not a driver of profits. General acute care hospitals likely do not have the expertise or focus necessary to efficiently manage psychiatric patients, and more profitable service lines could be deemed as more worthy of investment. Additionally, general acute care hospitals might not have comparable negotiating power, especially if they are negotiating with a managed behavioral health organization. Freestanding psychiatric facilities could also offer lower rates as a result of lower per diem Medicare rates, against which negotiations are benchmarked.

This analysis had several noteworthy limitations. First, the HSPD is derived from administrative data and reflects ownership changes over time; linkage to patient-level data (e.g., claims) would be necessary to understand how these structural changes relate to volume of admissions and care delivery. However, the HSPD is unique in its ability to capture whether outpatient providers and hospitals are commonly owned by a larger entity (i.e., health systems and chains). These data provide more descriptive information than the data historically used to understand trends in inpatient psychiatry (13). Second, our analyses were restricted to 2010–2016, and did not capture the present day. However, these years are important because they occurred after implementation of the ACA, which changed the financial landscape for behavioral health services.

Although the overall number of psychiatric facilities and beds remained stable from 2010 to 2016, the composition changed in terms of profit status, ownership, chain affiliation, and service characteristics. Future research is needed to understand the mechanisms underpinning these trends and their implications for equitable access to quality care (3, 14). Policy makers and payers should consider the potential for profiteering and institute appropriate safeguards.