Contracting between public agencies and private psychiatric inpatient facilities

Purchasing human services through contracts with private providers has become an increasingly common practice over the past 20 years. Using data from a national survey of psychiatric inpatient facilities, this paper examines the extent to which psychiatric units in privately controlled general hospitals and private psychiatric specialty hospitals (N = 611) participate in contractual arrangements to provide services to governmental bodies. It also examines how the likelihood of such a practice is affected by hospital characteristics (general or specialty, for profit or nonprofit) and features of hospitals' environments, including the competitiveness of the market for psychiatric inpatient care and the population's need for services in the hospital's county. The findings indicate that nonprofit psychiatric specialty hospitals were more likely than other types of hospitals to enter into such contracts, and that forces such as local competition and need for services were not predictors of such involvement. Contracting was shown to have a significant impact on the level of referrals a hospital accepted, but these levels were also affected by competition and need. Among hospitals with public contracts, referral acceptance from public agencies was unaffected by these factors, but they did have a significant effect on referral acceptance by hospitals without public contracts. These data suggest that public agencies contracting for services with private hospitals may represent a means by which "public sector" patients may gain access to private providers. Further, this mechanism may impose sufficient structure and regulation on the acceptance of such patients that many concerns of hospital administrators regarding patients who are costly and difficult to treat and discharge can be allayed.