Case study 1: Deinstitutionalisation in UK mental health services

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Part of A Transformation Fund to sustain the future of the NHS

Mental health services have gone through a radical transformation over the past 30 years – perhaps more so than any other part of the health system.

This process began with a wholescale transformation process known as deinstitutionalisation – that is, shifting care and support of people with mental health problems from psychiatric institutions into community based settings. At the start of the process, these institutions housed approximately 100,000 people; by the end, all had closed.

The replication of mental health deinstitutionalisation across the UK and subsequently in a number of other countries has resulted in a volume of international and cross-comparative research to inform learning on the processes involved in transformation more widely.


The primary agenda driving deinstitutionalisation was one of public and moral necessity. This was based on a growing emphasis on human rights as well as advances in social science and philosophy critiquing psychiatry and the boundaries of what constituted mental illness, which reached its height in the 1950s and 60s. A series of scandals in the 1970s around ill-treatment of mental health patients and a strong, vocal service user movement provided harrowing stories of people’s experiences of care, which contributed to this critique. As one of our interviewees, who was involved in the process of hospital closure, noted: ‘The over-riding fundamental reason was that it was the right thing to do.

This moral agenda, however, was supported by a number of other developments that facilitated the possibility and opportunity for transformation. Clinically, developments in medical treatment demonstrated that people with severe mental illness could be treated and that institutionalisation itself was iatrogenic (ie the treatment itself caused harm), resulting in the subsequent growth in outpatient treatment. New legislation restricted who could be admitted to institutions and set a precedent that the community was the most appropriate place for treatment. Politically, there was consensus among parties about hospital reconstruction, and further legislation set a vision for the provision of mental health services as part of this. Alongside this, Enoch Powell, then Minister for Health, announced the intention to halve the number of hospital beds for people with mental health problems.

Although there was little overt financial impetus for deinstitutionalisation, it was generally acknowledged that institutions were financially unsustainable and, in many cases, represented prime estate.

Intended benefits

Improving the patient experience was implicit in the moral argument for deinstitutionalisation. However, beyond this, the overt intended benefits were limited. A number of indirect benefits were envisaged within the planning process, including release of funds from estate. More generally, the impetus for hospital reconstruction (which accompanied deinstitutionalisation) was geared towards achieving greater integration of health and social care provision within the community.

Process and management

Internationally, deinstitutionalisation has had three main components:

  • the discharge or movement of individuals from hospitals into the community
  • their diversion from hospital admission
  • the development of alternative community services.

In the UK there were several concurrent programmes of change. Under the 1962 Hospital Plan, acute psychiatric inpatient services were developed on district general hospital sites as part of national reconfiguration. Local authorities were developing community mental health teams and there was an increased outpatient role.

In each area in which there was a long-stay psychiatric institution or asylum, senior NHS and local government managers were required to develop a financial project plan for closure of hospitals over a five year period. This had to contain a detailed projection of revenue to be released from ward closures and land sales, re-investment, NHS capital programmes, and new sources of funding.

New organisations were set up to manage the process and subsequently deliver services. Many of these were charities, including housing associations; in some cases existing charities took on this role. With involvement from each stakeholder group (including the district health authority, local authority and voluntary sector), a key function of these new organisations was to broker relationships to ensure that no one organisation had sole ownership, and to manage the power dynamics. An added benefit was that they enabled people to connect around a new organisational form with its own identity and purpose, underpinned by a board and trustees who were accountable for the process and outcomes of transformation.

These new organisations led on aspects of the transformation. Planning required an understanding of the needs of those people being cared for in institutions at the time, and the funding available over the long term. This was used as a basis for identifying the requisite settings, staffing and provision, and to ensure that new services were sustainable. These organisations subsequently received the majority of funding, led on developing new services, and created systems and structures to manage the transition, including workforce management and training.


The deinstitutionalisation process involved a significant focus on managing the workforce. Where it resulted in the closure of individual wards, staff were absorbed into the wider organisation. Where it resulted in complete closure, staff had three options:

  • to move into community mental health teams
  • to move into new residential care provision replacing hospital-based care for those patients who had severe mental health problems and could live in the community with support
  • to leave the service (retirement; voluntary redundancy).

There were some key issues that workforce planning had to address: NHS nursing staff were effectively going to be joining non-NHS providers; there was a substantial change in their role, from nursing to providing residential care; and there were changes in terms and conditions around work and pensions. The new organisations led substantial negotiation with unions and staff to agree terms and conditions (including pensions), with negotiations taking up to two years before staff were transferred over. These organisations operated with a dual management structure for the first two years: staff who had transferred over from the NHS were managed by a director of nursing, while residential staff were overseen by the management of the new organisation.

Training and staff development were key factors in setting up the new services. Re-training and re-skilling was a requirement before or at the same time as redeployment. New training structures were established to ensure that staff from the nursing and residential care sector could move up the managerial ladder without nursing qualifications. The lead of one organisation interviewed described to us how they invested in sending staff in management positions on dedicated courses and applied for Investors in People accreditation to demonstrate that they were serious about staff development. A core aim of the staff development strategy was to change the mindset of staff around expectations of care. Staff themselves had become institutionalised by the asylum system. Organisations provided a strong focus on learning together, developing a shared understanding of what they wanted to do, and identifying behaviours that were not appropriate for the new setting.


The impetus to close asylums began in the 1960s. This may have resulted in reduced admissions but, in practice, few community services were developed and large-scale closures did not start until the 1980s, with the first closure in 1986. For hospitals that were completely closed, the process took around two years. This included developing new structures and systems as well as planning the transfer of staff and patients.

Funding arrangements

There were four main funding avenues for deinstitutionalisation, as follows:

  • Social security payments were initially used for people living in the community to pay for long-term residential care.
  • Dowry payments allowed transfer from hospital budgets to local authority budgets, providing a pool of semi-protected resources for former long-stay patients.
  • Joint finance initiatives funded provision of social care for patients who would otherwise be the responsibility of the NHS. Money was made available from health to fund community care. These initiatives sped up the running down of hospitals and diverted people from entering hospitals.
  • A Mental Illness Specific Grant operated from 1991 to provide ringfenced funding to local authorities, to help them develop social care and community services.

In addition to government funding, the National Housing Federation provided funding to the new transformation organisations so that they could lease properties from local housing associations for residential care. Where hospitals were being closed as part of the process, funding for transformation was also linked to subsequent sale of estate.

Taking into account the funding available to individuals through social security payments and dowries in the development of new services was important in ensuring that provision of care would be sustainable in the long term.

As charities, these new organisations were not able to make a profit. In the case of one of our interviewees, their organisation only broke even in the first couple of years, a situation that was not seen as unique in the process of transformation.


Where community services were available and comprehensive, the consensus is that most patients significantly benefited from the process of deinstitutionalisation.

The movement of staff – particularly the loss of staff due to voluntary redundancies and the switch from nursing grades to residential care – meant that local health authorities saved up to 20 per cent of their total staff budget within the first year.

Although the closure of asylums eventually released significant funds, studies of deinstitutionalisation internationally have demonstrated that shifting care from institutions to the community does not generate cost savings. This is because the care provided subsequently tends to be of greater quality, and these improvements in care require additional investment.

Longitudinal studies of deinstitutionalisation demonstrate that outcomes of transformation were not always easy to predict. In some cases, the process produced unexpected results, new demands and a different set of risks. For instance, analysis of deinstitutionalisation in the USA found unexpected higher mortality among elderly patients (particularly those who were physically frail and had severe cognitive impairment) when they moved out of institutions.


Timescale of transformation

The slow pace of closure resulted in institutions that were expensive to maintain and often in a poor state, which meant capital could not be released, which in turn obstructed investment to create new facilities. Many of the large institutions were not sold until five or six years after closure; some have yet to be sold.

Overambitious aims

Although many stakeholders perceived the process of deinstitutionalisation as one of shifting care and support in line with patients’ needs, some organisations saw it as their role to ensure access to other components of community living such as occupation and social networks (some of which had been inherent in the asylum system). This ambition of transformation was always going to be very challenging.

Wider systemic considerations

The focus of transformation – to move mental health patients from hospitals to community settings – largely excluded primary care. Indeed, this was often a conscious decision, reflecting a belief that general practitioners (GPs) would not want to be involved in managing people with mental illness in the community. Evidence suggests that the failure to engage and consider the role of primary care practitioners has had a negative impact on subsequent provision.

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