. . . . The Commission report follows an extensive study of the role played by the state's eleven (11) for-profit private psychiatric hospitals, operating under Article 31 of the State Mental Hygiene Law, in the state's inpatient mental health system where they serve some 14,000 patients annually, and the relative costs of the services they provide. The Commission found that:

• private psychiatric hospitals offer high quality care to patients with commercial insurance, as well as to the growing number of children and elderly who rely on Medicaid and Medicare. In contrast to state psychiatric centers and psychiatric units of general hospitals, where the Commission in previous studies found widespread patient inactivity, private psychiatric hospitals offered more therapeutic programs and activities, had more psychiatrists meeting with patients, less use of restraint and seclusion, and much better follow-up with discharged patients;

   

• managed care has reduced lengths of stay almost by half, from 37 days in 1989 to 19 days in 1993 for private insurance patients, without affecting quality of care at private psychiatric hospitals. At the same time, without managed care's monitoring, Medicaid and Medicare average stays decreased only 3% and 7% to 65 and 28 days respectively. Lengths of stay for a comparable Medicaid population were 42% lower at general hospitals, however, suggesting that managed care can be successfully applied to this government assistance program;

   

• as a result of declining revenues and profits from patients with private means because of managed care, private psychiatric hospitals have been forced to turn to providing services to the elderly and indigent mentally ill covered by Medicare and Medicaid. Under Federal requirements, private psychiatric hospitals can only bill Medicaid for services to individuals under 21 or over 64. Revenue from this public source grew by 200% from 1989 to 1993 while Medicare income rose by 118%. If average Medicaid stays at private psychiatric hospitals were reduced to the levels of general hospitals, the Commission estimates annual savings of $13.9 million in medical assistance payments; . . .

. . . . Private psychiatric hospital Medicaid per diem rates 1993 they ranged from $288.32 to $691.21. Recent hospital spending decreases are expected to slow the overall growth in Medicaid rates because there is a two-year lag between the "base" year and the "rate" year, and recent cost reductions resulting from managed care during 1992-1993 will be reflected in declines in the hospitals' 1994 and 1995 Medicaid rates.

Under the Medicare program, the federal government acts as insurer for elderly beneficiaries. Medicare Part A, which is funded by wage taxes, is a compulsory insurance program that provides benefits for hospital and hospital-related services. Medicare Part B is a voluntary insurance program that provides coverage for physician services and is funded by premiums paid by beneficiaries and contributions from the federal government. The Medicaid program is a medical assistance program between the federal and state governments that provides benefits for the needy and the "medically needy." In New York, the program is generally funded by the federal government (50%), the state (25%), and localities (25%).

 In response to a draft of the Commission report, the Office of Mental Health generally concurred with the Commission's conclusions and recommendations. (Our emphasis.)