Monopoly of Insanity

Robert L. Green bought a psychiatric hospital south of San Francisco intending to use the site for an office complex. After a study, however, he discovered that a psychiatric hospital could be a gold mine.

Between 1969 when it went public and 1985, his company, Community Psychiatric Centers (CPC), had annual earnings growth of 15 to 30 percent. It is the most profitable psychiatric hospital chain in the country, owning hospitals across the United States and in Britain.

Much of this phenomenal growth and profitability is due to a law in every state that requires someone wishing to build an in-patient facility to obtain a certificate of need by demonstrating that a new facility is needed. By setting up operations before anyone else in several California suburbs, CPC has obtained virtual local monopolies and has kept its before-tax profit margins near 40 percent. Unfortunately for CPC, by the 1990s, the government programs that preserve these local monopolies were eliminated in many states.

SOURCE:

Fisher, Lawrence M. "Strains on Psychiatric Centers." New York Times, December 30, 1985:D1, D10.