Background. Altering the balance of provision between hospital and community care is a key and often contentious component of mental health care policy in many countries. Implementation of this policy in the UK has been slowed by the apparent shortage of suitable community accommodation for people with long-term needs for care and support. Among the consequences could be the silting up of hospital beds by people who could be supported more appropriately elsewhere, in turn denying in-patient treatment to people with acute psychiatric problems and unnecessarily pushing up health service expenditure.

Methods. Using data collected in a survey of hospital and residential accommodation services and their residents in eight areas of England and Wales, the cost components of today's balance of care were explored. Comprehensive costs were calculated and their associations with resident characteristics examined using multiple regression analyses.

Results. On a like-with-like basis, the costs of hospital in-patient treatment for inappropriately placed patients greatly exceeded the costs of community-based care.

Conclusion. Further reduction of hospital beds, however, is not the panacea for an appropriate balance of mental health care, given the unknown but potentially considerable extent of unmet demand, as well as the impact of previous in-patient bed reductions apparent in the services surveyed. Rather, service providers and purchasers should focus on developing community-based care (including increased provision of 24-hour nursed beds) by ensuring that resources released through earlier closure programmes have been redeployed for their intended use and by accessing additional pump-priming or bridging resources.