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

Objective: To assess, during a period of decreasing psychiatric inpatient utilization, cost savings from Assertive Community Treatment (ACT) programs for individuals with severe mental illnesses.

Data Source: U.S. Department of Veterans Affairs' (VA) national administrative data for entrants into ACT programs.

Study Design: An observational study of the effects of ACT enrollment on mental health inpatient utilization and costs in the first 12 months following enrollment. ACT enrollees (N = 2010) were propensity score matched to ACT-eligible non-enrollees (N = 4020). An instrumental variables generalized linear regression approach was used to estimate enrollment effects.

Results: Instrumental variables estimates indicate that between FY2001 and FY2004, entry into ACT resulted in a net increase of $4529 in VA costs. Trends in inpatient use among ACT program entrants suggest this effect remained stable after FY2004. However, eligibility for ACT declined 37 percent, because fewer patients met an eligibility standard based on high prior psychiatric inpatient use.

Conclusions: Savings from ACT programs depend on new enrollees' intensity of psychiatric inpatient utilization prior to entering the ACT program. Although a program eligibility standard based on prior psychiatric inpatient use helped to sustain the savings from VA ACT programs, over time, it also resulted in an unintended narrowing of program eligibility.