200 Beecham & Knapp
12 Costing psychiatric
JENNIFER BEECHAM and MARTIN KNAPP
When we mean to build,
We first survey the plot, then draw the model;
And when we see the figure of the house,
Then must we rate the cost of the erection;
Which, if we find outweighs ability,
What do we then but draw anew the model
In fewer offices, or at least desist
To build at all? (Shakespeare, King Henry IV, Part II)
The demands and needs for cost information in psychiatric contexts
have multiplied considerably in recent years, but have often been
frustrated by inadequate data. The typical costs data available to the
policy-maker, manager, clinical professional or researcher have been
dominated until recently by age-old accounting practices and line
management arrangements, and constrained by fragmentation of
responsibility. Most limiting of all, costs data have rarely been used
in making decisions about individual cases. In considering the
demands and needs for costs in psychiatry, this chapter describes a
research instrument – the Client Service Receipt Inventory (CSRI;
Beecham & Knapp, 1992) – which has been developed and extensively
applied in order to meet some of these needs. The chapter includes
illustrations of applications of data recorded using the CSRI.
Scarcity and costs
It is difficult to think of a health care system, in the present day or in
the past, that has not faced resource constraints. Demands and needs
for health care almost always exceed available supplies. Indeed, often
the pressures of scarcity have forced the complete re-drawing or
Costing psychiatric interventions 201
abandonment of promising plans and laudable aspirations. A current
example is the push to develop better community-based mental health
services, where the needs-led aspirations of the 1990 National Health
Service (NHS) and Community Care Act have been compromised in
some localities by severe shortages of appropriate services, giving way
to supply-led service arrangements (Johnson et al, 1997).
We should not be surprised – or even perhaps particularly depressed
– by this and other examples of policy or preferred practice fettered by
the scarcity of resources. Any lack of surprise should not be for the
cynical reason that there always seems to be a gulf between political
rhetoric and actual delivery, but because scarcity is the fundamental
reality. Aspiration will and should always run ahead of attainability.
Recognition that there are insufficient resources to meet expressed
demands or underlying needs is the prompt to examine carefully
how those resources are deployed. Almost every debate in and about
Britain’s mental health care services boils down to a discussion –
sometimes a heated disagreement – about resource use. In particular,
can they be employed more productively (that is, with greater
efficiency) or more fairly (with greater equity) in one use rather than
another? Almost any attempt to answer these efficiency and equity
questions will involve collecting and analysing quality evidence on
needs, outcomes and of course costs. This chapter focuses on the
last of these elements.
Demands for cost information stem from a variety of policy, practice
and research needs. Notwithstanding the well-known difficulties of
defining and measuring need, it has been remarked that there have
not only been increases in levels of need for mental health services,
but also growing gaps between latent or assessed needs and supplies
of services to meet them. Certainly, the ageing of the population is
increasing the numbers of people with dementia, posing major new
challenges for public sector health and social care services (Knapp
et al, 1998a). There is evidence of growing needs for child and
adolescent mental health services (Costello et al, 1993), and the
Psychiatric Morbidity Surveys of 1993/1994 uncovered large residuals
of unmet needs (Meltzer et al, 1995a,b).
Resource limitations, or economic pressures generally, can create
their own vicious circles. Needs that are inadequately addressed one
year because of supply constraints can return, perhaps with a crisis-
like vengeance, to dog providers in subsequent years. Child and
adolescent mental health problems are closely associated with
psychiatric and other problems in adulthood, unless the continuities
202 Beecham & Knapp
can be broken with effective early treatment (Maughan & Rutter, 1998).
These growing needs and their attendant problems represent latent
demands for economic information. They are the underpinning causes
of scarcity, and the underlying reasons for needing to adopt soundly
based allocation criteria, such as efficiency and equity.
Increasingly, these latent demands get turned into expressed
demands for costs information, although the transition is by no means
straightforward (Knapp, 1997). There are many such demands (see
Box 12.1). For instance, the substantial changes to the mental health
care system announced by UK ministers soon after the Labour
government came to power in June 1997, many of them developed
in the National Service Framework launched in 1999, clearly need
wide-ranging accurate resource utilisation data to inform local and
national decisions. Governments always need resource information
of this kind, but no more so than during a period of rapid change, as
the next few years promise to be. Similarly, the licensing of new drugs
and the development of new psychosocial interventions generate
demands for information, not just on efficacy but on resource
consequences (cost-effectiveness and cost offsets).
The mental health care system in the UK is characterised by
pluralism of both provision and funding. On the funding side, the
NHS is the major funder of treatment and care services, but in fact
comprises quite a large number of fairly autonomous agents,
particularly primary care groups and trusts, and health authorities.
There are also local authority social services departments, housing
departments and the criminal justice system, all financing services.
On the provider side, alongside the substantial historical presence of
Expressed demands for cost information
z To check value for money (and best value) for users and purchasers.
z To underpin and guide purchasing and providing decisions within quasi-
markets, and for other ‘managed care’ initiatives.
z To inform, monitor and evaluate current or proposed mental health
z To inform service delivery and practice, and to guide care managers
operating within devolved budgets.
z To evaluate the resource implications of new treatment modalities.
z To assist the marketing of new treatments such as pharmacotherapies.
z To inform decisions by formularies, licensing authorities and reimburse-
z To audit service provision and purchasing, and for accountability and
Costing psychiatric interventions 203
the public sector, there are private and voluntary providers, as
well as advocacy groups and campaigning organisations. The rapid
development of this ‘mixed economy’ of funding and provision was, of
course, a major policy priority for the Conservative governments of the
1980s and 1990s, but the mixed economy is clearly not going to
disappear with a Labour government. Consequently, there is an even
more pressing need for transparency of information about the costs of
different interventions, and the resource consequences of successful
and unsuccessful treatment. These are not required simply for cost
comparisons between competing providers, but represent cost needs
that run throughout Britain’s complex care system.
When the first edition of this book was published in 1992, there was
little British evidence on the economics of mental health treatments
and services. The position has changed, quite markedly in some
fields, even though costs information generally remains relatively
scarce. The internal market introduced by the 1990 Act obviously
generated a need for costs and price data to be collated and dis-
seminated, because priced contracts drove the quasi-market system,
and the response has been quite impressive in some areas. Auditors
within and outwith care-providing agencies have increasingly turned
their attentions to value-for-money and, more recently, ‘best value’
criteria, and public health and social care agencies have been able
to provide more such evidence. Care managers and keyworkers in
many localities have been instructed to work within preset budgets
and have been given costs and other data to assist their decision-
making. Research-funding bodies have also responded with the
explicit recommendation that health services research projects
should look not only at outcomes for users but also at the costs for
providers and the wider society, with the result that many more study
teams include a health economist.
How then is cost information to be gathered? This chapter focuses
on a research tool (the CSRI) that has been developed and success-
fully employed in the collection of information on costs, service
utilisation, income and related matters. We describe this schedule,
illustrating its flexibility for use in many mental health service and
evaluation contexts. Collecting such data is the first of three linked
tasks, so the next section continues by broadly outlining our
methodology for estimating service costs and for calculating the costs
of the full care packages recorded on the CSRI.
We will then illustrate the use of the CSRI from some of our own
research. Like the plans for the new health and social care systems set
204 Beecham & Knapp
in place in the early 1990s, and reinforced by the Labour government
in more recent policy pronouncements, the aim of this research tool
and its accompanying methodology has been to generate costs
data that are client-focused rather than agency-centred, comprehen-
sive rather than partial, consolidated rather than fragmented, and
constructively employed in the improvement of efficiency and equity
rather than merely employed to monitor probity. In this section, we
use data generated by the CSRI to outline the service and cost
implications of psychiatric hospital reprovision, look at cost–need
associations and explore issues of the relative cost-effectiveness of
A costing methodology for research in psychiatry
The basic cost rules
We first recommended four general costing ‘rules’ for psychiatric
research 10 years ago (Knapp & Beecham, 1990). The first rule
recommends that costs should be comprehensively measured. They
should therefore range over as many service components of care
programmes or ‘packages’ as is relevant in any particular circumstance.
Unless costs are defined and measured comprehensively, one
treatment mode may appear to be less costly than another, when
in reality that mode merely shifts costs into forms that have not
been measured (Weisbrod et al, 1980, p. 403).
The calculation of comprehensive costs is most usefully effected
at the individual level, partly because this is the level at which clinical
data are collected, and partly because this preserves inter-client
variability in the research domain – an essential feature of any needs-
based service system. The second costing rule then urges that neither
these variations between clients nor the likely variations between
facilities or areas of the country should be overlooked. Analysed
properly, these cost variations can produce useful policy and practice
insights, for costs will usually be linked to differences in individual
characteristics and needs and outcomes.
An examination of cost differences encourages conclusions to be
drawn about comparative performance. The third rule should then
come into play: such comparisons must be made on a like-with-like
basis. It is of little value, for example, to report that community care
costs less than hospital care if clients in the community have fewer
behavioural or health problems than those in hospital. Finally, cost
information is far more useful if it does not stand in isolation from
Costing psychiatric interventions 205
other relevant evidence, particularly outcome data. Reliance on cost
information alone could be dangerous, just as it is inadvisable to neglect
costs in policy and practice discussions and decisions. In a radical
review of community care that had a major influence on the 1990 health
and community care legislation, Griffiths wrote:
“To talk of policy in matters of care except in the context of available
resources and timescales for action owes more to theology than to
the purposeful delivery of a caring service.” (Griffiths, 1988, p. iv)
For example, underpinning most evaluations is the hoary old
question: for whom and under what circumstances is one intervention
preferable to another? But to define the criterion ‘preferable’ solely
in clinical outcome terms, without regard to cost, is to invite
unnecessary (that is, avoidable) difficulties of implementation.
These cost rules embody two sets of principles: they are consistent
with the demands of economic theory as applied to health and social
care (Knapp, 1984; Knapp, 1995; Drummond et al, 1997), and they
are also essentially the costing counterparts to the usual principles
of any evaluation. This congruence and the economic theoretical
grounding help considerably in the design and interpretation of
empirical research. With these four rules tucked under one arm,
we will describe the instrumentation developed for collecting
service utilisation data and calculating comprehensive support costs.
Although the potential undoubtedly exists within care management
or care programme frameworks, it is not yet possible to ask any one
person about the full cost implications of a client’s care package.
The process of calculating the full costs of supporting individuals,
therefore, is broken down into the three connected tasks described
z the collection of service receipt or utilisation data for individual
clients or patients over a consistently defined period;
z the costing or pricing of each service used; and
z the combination of these two sets of information in order to
calculate the cost of the full care packages.
Each of these tasks is described in general terms below, illustrating
the approach in a variety of applications, although focusing primarily
on an economic evaluation of psychiatric reprovision with which we
have been associated.
Collecting service utilisation data – the CSRI schedule
In order to calculate the costs of community care for people moving
from long-stay hospital residence, we developed and employed a new
206 Beecham & Knapp
instrument in 1986, the CSRI. The CSRI built on previous research at
the Personal Social Services Research Unit (PSSRU), University of Kent
at Canterbury, particularly on child care and young offender services
(see Knapp & Robertson, 1989, for a partial review), and incorporated
relevant parts of previously developed instruments in the mental health
field, particularly the Economic Questionnaire of Weisbrod et al
(1980). Although the instrument needed to be tailor-made to fit the
research context, an early requirement, and one that has proved
invaluable in subsequent research, was easy adaptability. At the time,
the CSRI was to be employed in the PSSRU’s evaluation of the
Department of Health’s Care in the Community demonstration
programme of 1984–1989, which concerned all the main adult client
groups, and also in the evaluation of the psychiatric reprovision
services being established under the closure programmes for Friern
and Claybury hospitals in North London.
In both evaluations, we could be certain that most clients would
have a key carer or case manager, or would be living in a group home
where a diary would be kept of residents’ activities (especially contacts
with health, social care and related services, and with peripatetic
professionals). The questionnaire was therefore originally designed
for administration by an interviewer from the research team to
the principal carer of the person with mental health problems. For
about 10% of the clients, the key carer could not be identified, for
example when someone was living independently in domestic accom-
modation. In these situations, the schedule was successfully completed
in an interview with the client. It was also completed during telephone
interviews and by staff with no interviewer present, even though not
specifically designed for that mode of use. In some research projects,
the key questions of the CSRI have been incorporated into other
schedules. However, experience has confirmed our initial expectations
that a trained interviewer can best tease out accurate and comprehensive
The CSRI was piloted in the summer of 1987 in the Maidstone
Care in the Community project for people with learning difficulties,
where a wide range of services had been developed, affording the
chance to test the instrument under different conditions. A second
round of instrument refinement was based on use of the CSRI in
another three Care in the Community projects. Since its introduction,
the CSRI has been used in many evaluation studies, and some of the
service contexts are listed in Box 12.2.
The questionnaire is usually printed on six A4 pages and takes
approximately 20 minutes to complete. Both factors, however, will vary
depending on the client’s situation, the research focus, the scope of
costs and the extent to which required data are recorded on other
Costing psychiatric interventions 207
schedules used in the study. CSRI questions are largely structured
but, given the complexity of community care arrangements, a few
narrative answers are required. The design of the questionnaire
incorporates blank spaces in which to write additional comments or
interpret the occasionally confused responses of the interviewee. A
series of ‘prompt cards’ can supplement the CSRI. These may contain
indicative lists of accommodation types, different services and social
security benefits. For a local evaluation, they may contain lists of named
The CSRI collects retrospective information on service utilisation,
service-related issues and income in a manner commensurate with
estimating care package costs. The retrospective period (prior to
the date of the interview) is a compromise between the accuracy
that comes from not asking respondents to cast their minds back
too far and the comprehensiveness that can only come by allowing
sufficient time to elapse for some uncommon, but potentially
expensive services to be used. In the hospital rundown evaluations,
we divided the service utilisation section (see below) into two parts,
one covering the previous month – in the North London reprovision
study, this was the twelfth month after discharge from hospital –
and the other asking about less regularly received services (such as
A selection of evaluation contexts in which the CSRI has been used
z A long-term evaluation of an assertive outreach service, the Daily
Living Programme (Knapp et al, 1994; Knapp et al, 1998b).
z A study of people with schizophrenia living in the community in two
London districts (Beecham et al, 1995).
z The evaluation of psychiatric and mental handicap hospital rundown
and community care developments (Knapp et al, 1992; Cambridge et
al, 1994; Donnelly et al, 1994; Beecham et al, 1997).
z A comparison of an experimental case-management-oriented
community psychiatric nursing service with a more traditional model
(McCrone et al, 1991).
z An evaluation of a new intervention to improve compliance with
medication (Healey et al, 1998).
z Evaluations of children’s mental health and social care (Beecham &
Knapp, 1995; Knapp et al, 1998c).
z Studies of community care for older people (Beecham et al, 1993;
Petch et al, 1996).
z Studies of care for people with challenging behaviour (Felce et al,
z Evaluations of new drugs (Drummond et al, 1998).
z An evaluation of specialist work schemes (Schneider & Hallam, 1997;
Hallam & Schneider, 1999).
208 Beecham & Knapp
hospital admissions or GP visits) over the past 12 months. These
durations are not fixed and can be varied to fit particular research
designs. For example, repeated use of the CSRI – as in the first
phase of the Daily Living Programme (Knapp et al, 1994) evaluation,
when interviews were conducted at 4, 11, and 20 months after entry
to the study – allows data to be recorded only for the period between
interviews. For this longitudinal study, information gathered at
all interviews was recorded on the same schedule, which meant the
interviewer could use data from the previous interview to prompt or
The first section of the CSRI covers background and client information,
for example, recording client study number, gender and date of
birth. Depending on the availability of information from other instru-
ments, the interviewer could then ask for details of past admissions
and discharges from hospital, participation in a special programme,
registration with a general practitioner (GP) and medication. This
opening section also records the date and place of interview and
identifies the interviewer. A useful development of the CSRI has
been to incorporate questions on other socio-demographic indicators,
such as educational attainment or ethnicity (The Client Socio-
Demographic and Service Receipt Inventory (CSSRI–EU); Chisholm
et al, 1999).
The second section concentrates on describing the study member’s
accommodation and living situation. Accommodation is usually a major
component in terms of its contribution to clients’ support arrangements
and the associated cost. The CSRI records information on: address,
partly for the purposes of identifying facility type and budget, and partly
because location influences cost (London is more expensive than
the rest of the country, for example), and some adjustment may be
needed; tenure of accommodation (such as council or privately rented,
residential home or owner–occupier); a simple description of the size
of the unit (number of rooms and number of other residents); the
amount paid by the client or household in rent or other payments; and
receipt of housing benefit, if any.
Many clients with severe mental health problems do not live in
domestic accommodation but in specialised facilities, such as
residential or nursing homes, hostels or group homes. We can
impose a standardised categorisation of facilities using information
recorded on the CSRI about residents’ tenure, facility size, staffing
arrangements and managing agency (NHS, local authority, voluntary
or for-profit organisations). Where several clients live in the same
facility, some of these questions need be completed only once. In
our evaluation of domus care, these overarching questions were
separated from the main questionnaire (Beecham et al, 1993).
Costing psychiatric interventions 209
Unfortunately, many people with mental health problems (although
generally not the former long-stay in-patients moving to planned
community care schemes) quite frequently move from one address to
another (Slade et al, 1999), and the CSRI can record such changes of
address, including hospital re-admissions. Instability of accommodation
obviously complicates cost calculation, but for clients it can have
dire consequences for ability to work, entitlements to social security
and indeed mental health itself. In some applications of the CSRI,
where study members are more likely to live in domestic accom-
modation, this section has been more comprehensive, asking about
the composition of the household and whether clients themselves have
any care responsibilities. More attention is also paid to how household
expenses are covered.
Research has shown that concerns about money can have an adverse
effect on some mental health conditions (Brugha et al, 1985; Granzini
et al, 1990). Many people with mental health problems have low
incomes, owing in part to the heavy reliance on social security benefits
and also to problems associated with under-claiming of benefits, low
wages if work is found and unstable work patterns (Melzer et al,
1995b). Information on employment history, earnings and other personal
resources is therefore collected. Former long-stay hospital residents
rarely find (open) employment, but for many other groups of people
with mental health problems, employment and its loss are important
facets of both service effectiveness and cost. More questions,
therefore, may be needed on employment history, and a number of
questions may be needed on current employment activities. The costs
of lost employment resulting from mental ill health or in-patient
treatment will fall to clients (lower income) and to society (lost
productivity), the actual values to be attached depending on a variety
of labour market and individual circumstances.
If employment-related costs are unlikely to be an issue, it is more
important to clarify receipt of social security benefits. In strict
economic terms, these should be considered as transfer payments,
which do not represent an aggregate cost to society, but they are
also good proxies for living expenses, since clients usually rely on
these benefits as their main (often only) source of income. Data on
changes in benefit status over the past year may also be important, as
they will reflect changes in clients’ accommodation or other
circumstances, or changes to the entitlement regulations.
The service receipt section is at the core of the CSRI and can take up
most of the interview time. Community care is delivered and received
within a fragmented ‘system’ in which many agencies and organisations
provide a variety of services. There is certainly no standard package of
care handed out as people are referred to psychiatric care and so there
210 Beecham & Knapp
will be a great deal of variation between clients’ packages of care. In this
section, the schedule identifies receipt of services that are not funded
within the accommodation budget; either health or social care services
available to everybody or specialist mental health services. Information
is collected on services for which the client leaves the accommodation
facility to attend, such as day activity centres, hospital-based services,
appointments at the GP surgery or leisure activities. Some professional
support or services are provided to the client at home: home-help,
community psychiatric nurse or field social worker visits are examples.
For most research purposes, the CSRI provides a list of the different
service types, such as local authority day care or out-patient appointment,
which forms the left-hand column of a table. For each service type, the
number of contacts over the chosen retrospective period is requested
and the average duration of these contacts. In the final column, in which
‘not-applicable’ cells are shaded, the interviewer can record whether
the contacts are normally made at a clinic or office or at the client’s
home. For domiciliary services, it is also important to identify whether
the professional sees several clients for a group session (as with
occupational therapy) or sees them sequentially (as with GP visits). The
allocation of service costs to individuals must take into account the scope
of the visit.
For services that are likely to absorb a high proportion of care
package costs, we advocate collecting more detail. For example, the
length of each in-patient admission should be accurately recorded
alongside information on the type of hospital and/or ward. (Intensive
psychiatric care units have been found to cost nearly three times as
much per day as long-stay hospital wards; Netten et al, 1998.) Special
consideration should also be given to recording relevant details of a
new intervention and its comparator.
The final section of the CSRI considers the role of informal carers.
The availability of such support for people leaving long-stay psy-
chiatric hospitals appears to be limited (Knapp et al, 1992), but if a
number of study members are known to be living independently or
with other members of their families, more weight would need to be
given to this dimension. The CSRI includes questions on the input
of informal carers in terms of time spent (frequency and duration of
support) and tasks undertaken (personal care, shopping, domestic
tasks and social visits). Financial costs borne by family and friends
can also be recorded and may include extra food or heating,
increased replacement of clothes and equipment, as well as cash gifts.
Family members may receive extra income as a consequence of their
relative’s problems, such as attendance allowance.
These five sections form the framework for the CSRI, within which
responses to questions are carefully structured to facilitate cost
Costing psychiatric interventions 211
estimation. It is the emphasis put on different aspects of each section
that provides the instrument’s flexibility and its adaptability to different
research and service contexts. Each CSRI summarises one person’s
care package (see Boxes 12.3, 12.4 and 12.5), the components of which
we would expect to vary given that any individual study member has a
different set of characteristics and needs (broadly defined). By
aggregating the service receipt across sample members, a list of all
services used can be compiled. A unit cost should be estimated for
each of these services.
Estimating unit costs for health and social care services
The second major task in measuring the costs of support for people
with mental health problems is the costing or pricing of the various
services used by clients. Economic theory advocates basing cost
measures on long-run marginal opportunity cost. In practice, by ‘long-run’,
we mean to move beyond the small-scale and immediate development
of community care (for example), which could probably be achieved
by using present services more intensively at very low marginal cost.
Since national policy intentions are to develop community services, it
would hardly be credible to measure only short-run cost implications.
By ‘marginal’, we mean the addition to total cost attributable to the
inclusion of one more client (the production of the marginal unit of
output in general economic parlance). By ‘opportunity cost’, we mean
that the resource implications should reflect opportunities forgone
rather than amounts spent. The opportunity cost measures the true
private or social value of a resource or service, based on its value in the
best alternative use. In a perfectly informed and frictionless market
economy, this ‘best alternative use value’ would be identical to the
price paid in the market. Not everything is marketed, not every market
works smoothly, and information is rarely complete, with the result
that observed prices and opportunity costs diverge. The recorded
depreciation payments on capital equipment or buildings, for example,
will not usually reflect the opportunity costs of using these durable
resources, nor will the (zero) payments to volunteers and informal
carers usually indicate their social value.
In application of these principles, it happens that today’s (short-
run) average revenue cost, plus appropriate capital and overhead
elements, is probably close to the long-run marginal cost for most
services we would encounter. In this chapter, we will say no more
about the calculation of these average revenue costs or their capital
add-ons, for once we open out the description we will need more space
than can presently be made available. Moreover, the details are not
everyone’s cup of tea. We have written about them elsewhere, briefly
212 Beecham & Knapp
(Knapp & Beecham, 1990), in more detail in relation to mental health
care (Beecham, 1995), and in much greater depth with various health
and social care examples (Netten & Beecham, 1993). An annual
compendium is also available that pulls together a number of research
and other sources to present nationally applicable unit costs for over
70 health and social care services (Netten et al, 1998).
In the psychiatric reprovision study, two main procedures were
used to cost or price each service. Accommodation facilities, hospital
and day care services were expected to account for a large proportion
of the total cost of care packages, and their unit costs were carefully
and individually calculated by adjusting published or routinely
collected facility accounts. Particular attention was paid to services
Psychiatric reprovision package, independent living
Mr A is 39 years old, lives alone in a flat rented from the housing association and
has no informal care support. He has gastro-intestinal problems, which require
monitoring by his GP. He also takes medication (without supervision) for
dermatological problems. He presents no behavioural problems.
Services received cost Description
Social work £15.45 Social worker and link worker visit once every
two weeks for 30 minutes
GP £1.50 10 surgery appointments during the past year
Chiropodist £0.36 Two visits during the past year
Hospital out- £14.79 One appointment each month for a check-up
patients and depot injections
Housing officer £5.41 Visits once very two weeks for 15 minutes
Accommodation £109.41 Includes taxes forgone by the local
authority, and capital, management and
maintenance costs borne by the housing
Living expenses £102.27 Income support, invalidity benefit and
Total weekly cost £249.19
of care package,
Source: Hallam, 1998
Costing psychiatric interventions 213
at Friern and Claybury Hospitals, the costs of which would be required
as comparators for community care costs. The planned level of detail
to be obtained, and therefore the accuracy of the pricing, was lower
where the service was likely to contribute less to total cost, such as
input from field social workers, nurses, psychiatrists or chiropodists.
For these services, national statistics or data from other studies were
used to build up our unit costs. In all cases, prices were calculated to
approximate the long-run marginal costs of care, including the
opportunity costs of all capital employed.
Psychiatric reprovision package, assessment centre
Mr B is 51 and lives with seven other residents in an assessment centre managed
by the community health services trust. He needs daily medical care for respiratory
problems. Mr B becomes verbally aggressive at least once a month and has episodes
of extreme agitation, during which he becomes doubly incontinent. He is able to
concentrate for short periods only, has poor hygiene habits and tends to be socially
isolated. A heavy smoker, he is considered a health risk and has twice been
responsible for causing a fire.
Services received cost Description
Social work £0.95 Social worker has visited twice during the
past year for one hour each time
Depot injection £5.37 Cost of the drug given by in-house staff
Chiropodist £1.42 Visits once a month seeing four residents on
Dentist £0.15 One check-up during the year
Optician £0.23 One visit to optician for sight test in past
year; glasses were not prescribed
Day centre £3.54 Drops in for approximately one hour per
Accommodation £1225.59 Includes care, hotel and building-related
costs of the residential facility
Living expenses £29.99 Personal expenses and bus pass
Total weekly cost £1267.24
of care package,
Source: Hallam, 1998
214 Beecham & Knapp
Costing full care packages
The CSRI is a means to an end, rather than an end in itself. The
interview collects the data that enable packages of care to be
identified. This information must then be manipulated and joined
with information on the costs of those services. This data preparation
stage allows service receipt to be allocated at a constant unit over a
defined period of time. The unit of measurement for service receipt
(per hour, say) should be the same as that used for the calculation
of service costs. The period of time is often defined by the research:
for the North London reprovision study, the follow-up period was
one year after discharge from hospital; for the Care in the Com-
munity programme evaluation, the follow-up was nine months; and
for the Daily Living Programme, several follow-up periods were used,
varying from 4 to 9 months.
Psychiatric reprovision package, staffed group home
Ms C is 57 years old and lives in a small registered care home that has six places. It
is one of four units with a central office and waking staff cover at night. She has
no particular health or behavioural problems, but is a careless smoker, causing
problems on a daily basis.
Services received cost Description
Social work £0.11 One visit by field social worker during the
past year. Two residents seen during this visit
GP £1.37 Three visits during the past year
Psychiatrist £1.70 Two visits during the past year seeing two
residents on each occasion
Chiropodist £1.42 Four 30-minute visits per year
Resource centre £70.93 Attends five days a week, four hours a day
Accommodation £897.22 Includes care, hotel and premises costs of
residential facility as well as personal
Total weekly cost £972.75
of care package,
Source: Hallam, 1998
Costing psychiatric interventions 215
Boxes 12.3, 12.4 and 12.5 provide three illustrative case studies,
taken from the economic evaluation of psychiatric reprovision in
North London. For each person, we describe the components of his
or her care packages, that is, the frequency and duration of contact
with any services over the year prior to interview. The average weekly
costs are listed for each component, estimated using the approach
outlined above, and the total weekly cost of the care package
calculated. In the next section, we consider some of the ways in
which these cost-related data can be used to address policy and
Illustrations of costs research
We can illustrate the employment of the resultant economic data
by considering some results from the long-running evaluation
of psychiatric reprovision in North London. In debates about
the rundown of long-stay hospital provision and its replacement
by community care, doubts about economic viability are rarely
far from the surface. In this chapter, we address three questions.
What are the service and cost consequences of moving long-stay
patients from the hospital to be supported by community-
based services? Can we predict subsequent community costs from
information gathered on patients in hospital? Of the many variants
of community care, which are the more costly, and which the more
The decision to close two of the largest psychiatric hospitals in
North London was taken in 1983, since which date the regional
health authority and the Department of Health have funded research
to examine the psychiatric reprovision services being established
to replace them. In association with the Team for Assessment of
Psychiatric Services (TAPS), researchers from the PSSRU at
the University of Kent at Canterbury and the London School of
Economics, and more recently the Centre for the Economics of
Mental Health at the Institute of Psychiatry, have been studying the
economics of reprovision (Beecham et al, 1997; Knapp et al, 1997).
The main focus of the economic evaluation has been on in-patients
who have been in continuous residence for at least a year, and who,
if over 65 years of age, do not have a current diagnosis of dementia.
In this chapter, we concentrate on people who left hospital and for
whom follow-up data were collected one year after discharge. (Many
former hospital residents have also been assessed five years after
discharge.) The first reprovision patients moved to the community
216 Beecham & Knapp
Describing community care services and costs
By March 1993, when Friern Hospital was closed, a total of 813 people
who met the study criteria had left the two hospitals under the rundown
plans, most under the reprovision arrangements that carried financial
transfers. Baseline information for all patients in the hospitals was
collected by the TAPS researchers covering: mental health status, using
the Present State Examination (PSE; Wing et al, 1974) and the Social
Behaviour Schedule (SBS; Sturt & Wykes, 1986)); physical health;
personal and historical data; patient attitudes; living skills, using the
Basic Everyday Living Skills schedule (BELS; Leff, 1997); information
on patients’ social networks using the Social Network Schedule; and
an assessment of living environments. Altogether, including the ‘new
long-stay’ patients who had accumulated in the two hospitals since
the study began, baseline information has been assembled on nearly
1000 in-patients. The TAPS research design compared aspects of
the quality of life for patients discharged from the two hospitals with
similar patients who remained behind, but also assessed change before
and after discharge from hospital (Leff et al, 1996a; Leff et al, 1996b;
Detailed service utilisation data formed the basis of our cost
estimates for 533 people leaving the two hospitals, and community
care costs were more broadly estimated for a further 218 people.
The remaining 8% of the full sample of leavers died before the
interview date, could not be traced or moved out of the region. For
533 people for whom data were collected on the CSRI, community
service use and the associated costs are summarised in Table 12.1.
These data aggregate the care packages (see the examples in Boxes
12.3, 12.4 and 12.5) for each study member in the sample. The
figures illustrate the variety of services used by psychiatric re-
provision clients, spanning specialist mental health provision and
secondary and primary health care services, as well as social care
services provided by public sector agencies (local authority social
services departments) and independent sector organisations. The
low level of contact with police or probation services is noteworthy –
former long-stay patients rarely cause high-support burdens to the
criminal justice system.
The final two columns of Table 12.1 show the relative contribution
to total costs for each service. Accommodation placements obviously
dominate, as most study members live in high-support residential
homes or staffed group homes. Hospital-based services also continue
to play a major role. In-patient services were used by only 15% of
sample members, but absorbed 16% of the costs of support for those
who were re-admitted. Day support services, whether provided within
or outside the hospital, are also an important source of support,
Costing psychiatric interventions 217
together accounting for just over 6% of the total costs of support for all
clients (final column). In contrast to these quite expensive services,
some are used by a much higher proportion of clients, but make a
smaller contribution to total cost; community psychiatry services,
chiropody, and the GP are examples.
This type of descriptive information begins to reveal where the cost
burdens lie. Which services must expand to support former long-stay
Distribution of costs by service
of service to total cost (%)
Services used Clients using Over all clients Over all clients
in the community each service
(%) using service (%) (%)
Accommodation and living 100.0 86.9 86.9
Hospital out-patient services 25.9 1.9 0.5
Hospital in-patient services 14.8 16.1 2.4
Hospital day patient services 22.9 14.7 3.4
Local authority social 17.4 9.7 1.7
services day care
Voluntary organisation 15.2 8.1 1.2
Social club services 6.6 2.3 0.2
Education classes 4.5 6.9 0.3
Community psychiatric 57.8 0.9 0.5
Chiropody 41.3 0.1 0.1
Nursing services 29.1 1.5 0.5
Psychology services 14.4 1.0 0.1
Occupational therapy 8.6 2.5 0.2
Drugs (depot injection) 14.3 1.0 0.1
18.6 0.9 0.2
Physiotherapy 2.4 – –
GP 74.5 0.5 0.3
Dentist 25.3 0.2 –
Optician 19.9 0.2 –
Community pharmacist 5.8 0.7 –
Field social work 23.6 4.3 1.0
Police and probation 5.8 0.7 –
Client’s travel 29.3 0.4 0.1
Volunteer inputs 1.7 4.2 0.1
Case review 9.9 0.5 0.1
1. Data available only for those people for whom a full CSRI was completed (n=533).
2. Includes a number of services each used by only a few study members. Examples
are finance officer, aids and adaptations, audiology, aromatherapy, employment
officer, home-help, job club and reminiscence group.
218 Beecham & Knapp
hospital patients as they move to community-based care? If in hospital
all these services (or functions) were provided from within the
hospital budget, who now funds these components? These are issues
about the distribution of resources in community mental health care
provision that can only be addressed by taking a comprehensive
Associations between costs, client characteristics and needs
The average cost of community care for our sample of 751 former long-
stay hospital residents was £690 per week (1997/1998 prices), yet the
most expensive care package was at least 20 times more costly than
the cheapest. Why do care package costs vary?
We would expect a primary source of this variation to be client
needs or problems. For example, do people with greater needs or
problems get more support? We use the term ‘problem’ to describe
those psychosocial characteristics of clients on which psychiatric
and associated support services are expected to have an impact. If
costs summarise, albeit imperfectly, the resources expended or
services delivered to clients, how well are services tailored to address
these problems? Using a cost function approach, ordinary least
squares (OLS) regression was employed to explore the causal links
between cost and its hypothesised determinants. We summarise the
findings here and the methodology, and full results and impli-
cations, are considered at greater length in other papers (Knapp et
al, 1995; Knapp, 1998). The estimated cost functions indicated that
community care costs are sensitive to differences in a number of
client characteristics as assessed in hospital, explaining 21% of
the variation in the total weekly cost of support. Demographic
characteristics exert only a limited influence on costs; neither age
nor gender proves to be significant, but costs are higher for people
who have never married. Three of the reasons for original admission
to hospital (transfer from another psychiatric facility, inability to
cope and admission to hospital under the Mental Health Act) are
associated with the much later community reprovision costs, but
their effects are not easy to interpret and the data may have referred
to circumstances prevailing many years earlier. Easier to understand,
perhaps, is the effect of people’s history of hospital care. A greater
proportion of life spent in hospital and a greater number of previous
admissions to hospital increased the costs of support packages in
the community, suggesting that prolonged institutionalisation
increases the need for community support services.
The influences of clinical factors on cost are particularly interesting.
People with more negative symptoms (a measure constructed from
Costing psychiatric interventions 219
the PSE scores) have higher than average costs. Higher scores on the
Social Behaviour Schedule reflect higher staff-reported ratings of
abnormal behaviours and, with one exception, imply higher costs. The
negative effect of attention-seeking behaviour could be indicative of a
therapeutic response, or may be related to social network size and
gregarious behaviour. Two indicators of physical health needs (number
of areas in which daily nursing care is required and taking medication
for physical illness) are both associated with higher costs. Diagnosis
had no obvious effect on cost once the above factors had been taken
A third set of analyses on the reprovision study data explored whether
particular variants of community care for former long-stay in-patients
were more costly, or more cost-effective. Exploring inter-sectoral cost
differences has particular policy relevance today. Are public sector
services more costly or less efficient than non-public ones? Does
the high cost of care in health authority facilities, in contrast
to facilities run by other organisations, reflect the creation of
environments that encourage client dependency, or at least not
encourage independence? Or, alternatively, is high cost the logical
corollary of the tendency for health authority facilities to accommodate
those former residents with greater needs? To address these questions,
analyses were undertaken on data for the 429 former in-patients who
were living in specialised accommodation; that is, residential or nursing
homes, hostels, staffed group homes or sheltered housing, which were
distinguished using standardised definitions. Sectoral responsibility
for individuals was defined as that which managed the accommodation
facility: NHS, local authority social services department, voluntary (non-
profit) organisation, private (for profit) organisation or individual,
or consortium arrangements (usually health and voluntary sector
organisations working together). Costs were found to be lowest in the
private sector and highest in the NHS and consortium sectors. However,
quality of care indicators suggested that the lowest-cost sector is
performing least well, and higher-cost sectors offer better quality
(Knapp et al, 1999).
The types of analyses described above begin to address some
fundamental issues of efficiency and equity on the allocation of mental
health care resources. Who gets what services at what cost? Can scarce
mental health resources be better employed in one way than another?
Alongside data on clients’ needs and characteristics, finding the
answers to these questions relies on good-quality costs data. Sensible
220 Beecham & Knapp
expectations of any service are that it will respond to the needs of each
user and seek to improve their welfare (broadly defined) or at least
prevent further deterioration in, say, symptoms. It is also sensible,
therefore, to assess the resource inputs (costs) at a similar level, giving
research the capacity to evaluate together the costs and the effectiveness
of a service.
In this chapter, we suggest that costs summarise the end-product
of decisions to commit resources in a particular way: the provision of
services and other support. At the client or individual level, such
decisions result in the provision of a ‘care package’, or a set of services
that each client uses. Just as mental illness has consequences for
individuals in many areas of their life, so too will their care package
span many types of different support services. These services often
involve several provider agencies and organisations, but management
information systems are not yet sufficiently developed to capture a
full picture of all the components of the care package. To carry out
our research, therefore, we developed a specific instrument for
collecting costs-related data for people with mental health problems,
Since its first use in 1986, the CSRI has been developed and
modified as the demands for cost information have both increased
and broadened in scope. One research-based issue has been to
consider whether a shortcut could be found for the CSRI and its
attendant methodologies. This would make cost estimation a less
daunting and less time-consuming research task and therefore
increase the frequency with which cost and cost-effectiveness studies
are undertaken. Our re-analysis of five large research databases
allowed us to identify the services that contributed most to the total
costs of supporting people with mental health problems. Accom-
modation and living expenses, in-patient hospital stays, NHS and
local authority day services, and out-patient appointments were
found to account for between 90% and 98% of total costs (Knapp &
Beecham, 1993). This ‘reduced list’ methodology was implemented
in a study of residential care services in eight health districts
(Chisholm et al, 1997).
Building on our work of the 1980s, the CSRI has been adapted to
evaluate a variety of service contexts and a wider range of adult and
child client groups, and there has also been considerable international
interest. Adapting the CSRI for use in cross-national studies has
involved careful translation, as well as work to standardise service
definitions across different care systems (Drummond et al, 1998;
Chisholm et al, 1999). Local versions for evaluating mental health care
in Italy and Spain have been developed (Amaddeo et al, 1996; Vásquez-
Barquero et al, 1997), and work is currently underway to adapt the
Costing psychiatric interventions 221
CSRI for use alongside a case register (Amaddeo et al, 1997) and for
use in clinical practice.
In the Foreword to Drummond (1980), Alan Williams suggested
“one cannot but help sympathise with clinicians and other health
service professionals who feel that with so many pressures upon
them they might at least be spared the distasteful task of having to
think about efficiency, and the husbanding of scarce resources,
on top of all their other problems.” (p. vii)
Two decades later, the pressure to economise has increased
markedly. The cost-effectiveness imperative is stronger than ever.
The demands for cost information have grown, and requirements
for cost information now permeate all levels of decision-making and
serve to emphasise the changed context within which mental health
services are planned, delivered and received. The supply of (decent)
cost information has not kept pace with the demands that techno-
logical and practical changes have created, but methodologies have
been developed and banks of data and experience are being
constructed to bolster the supply response and to aid cost-sensitive
decision-making. There will never be answers to each and every cost
question, but the distance between what is demanded and what can
be supplied appears to be narrowing.
Research described in various parts of this chapter has been funded
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Thames Regional Health Authority, and some has been conducted
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