Just months after he was first elected California Governor in 1966, Ronald Reagan and the Legislature enacted a radical reform of the state’s mental health care system. Rather than warehouse mental health patients indefinitely in state institutions, they would be treated in their local communities. As it turned out, the triumph of these so-called reforms was a cut in state funding for mental health and the closure of publicly-funded hospitals for the mentally ill in California.

As a result, public and private acute care hospitals have become the custodians for individuals experiencing psychotic episodes or other bouts of instability. Some of these deeply troubled patients are put into the category of “5150 holds,” the section of the state Welfare and Institutions Code that allows a person believed to be of immediate harm to themselves or others to be held against their will for 72 hours for psychiatric evaluation.

Hospitals without psychiatric beds or are not designated as a psychiatric facility may not hold these patients beyond eight hours as a search is made for a more appropriate facility without being criminally or civilly liable. However, SB 916, signed into law by Gov. Schwarzenegger last October increases the hospital’s time limit to hold the patient to a maximum of 24 hours.

If the hospital lacks inpatient psychiatric beds, the onus is placed on each county’s department of mental health’s response team to find a psych bed. However, these teams are often slow or reluctant to respond. The Los Angeles County Department of Mental Health, for example, has pulled back on its deployment of response teams because its administrators believe that it is illegal for them to write a hold without a bed available. That has left the burden squarely on the ill-equipped private hospital.

Such patients cram the ERs of urban hospitals in low-income neighborhoods, such as California Hospital Medical Center, located near downtown Los Angeles, that receives an average of six 5150 patients a day, but on some days there are as many as 10 such patients – in an ER with only 19 beds.

California Hospital Medical Center is hardly alone in this situation. St. Joseph Medical Center in Orange has two of 57 emergency department beds allocated for psychiatric patients. However, the hospital admits as many as 11 psychiatric patients a day. In such a situation, a specific portion of the emergency room has to be cleared of potentially harmful items to hold the patient. A special “sitter” – often a member of the nursing or security staff – needs to be assigned to observe such a patient around the clock. Such patients often put already crowded ERs onto ambulance patient diversion, complicating matters for other facilities nearby.

There is no expectation that this situation will improve anytime soon. Southern California’s privately-operated inpatient psychiatric beds are disappearing. When Century City Hospital closed earlier in the decade, it took 41 psychiatric beds with it. Cedars-Sinai has trimmed its unit in recent years by more than 25%. California Hospital Medical Center, San Gabriel Valley Medical Center and St. Mary Medical Center have all closed their voluntary units in recent years. Orange County, with nearly 3 million residents, has fewer than 200 general psychiatric inpatient beds. There are only 13.5 publicly-funded psychiatric beds, according to county officials.

The reason so many psychiatric beds have gone off line is simple – they are bringing in far less revenue than is required to operate them.

In one scenario, private insurers pay anywhere from $800 to $1,000 a day per bed at two acute care hospitals in Southern California that operate psychiatric beds. These beds cost around $800 a day to operate. That generally means a privately insured patient is at least a break-even proposition to the hospitals, with some positive cash flow in the best-case scenario. However, Medi-Cal pays a mere $475 a day for a psychiatric bed – a figure that hasn’t budged in years. That means every Medi-Cal patient housed in these two non-profit community hospitals costs each a minimum of $300 a day, per Medi-Cal patient – or more than $100,000 a year – in negative cash flow.

Recent mental healthcare reforms usually occur in the wake of a tragedy. In New York, the January 1999 death of Kendra Webdale - killed when she was pushed into an oncoming subway train by a man with a long history of mental illness and inconsistent care - sparked a movement in that state toward “assisted outpatient treatment.” In essence, AOT mandates that those with incapacitating mental illness receive involuntary treatment, such as the administration of antipsychotic drugs, on an outpatient basis.

AOT has been a qualified success in New York. Six months after its implementation, the incidence of “significant events” - psychotic episodes – had dropped considerably. The incidents of psychiatric hospitalizations, homelessness and arrests dropped dramatically.

In 2003, California enacted “Laura’s Law,” its version of AOT. The following year, voters approved Proposition 63, which imposed a surtax on high-income Californians to raise $1.5 billion a year to shore up the mental healthcare system. Yet both initiatives have been unevenly implemented at best. Laura’s law is not accompanied by state funds, and thus few counties have fully implemented it.