What if private prison contracts were structured in a way that they would favor bids by organizations that do mental health institutionalization and prisons both? What if we made treating mentally ill people was slightly more profitable than warehousing them in prisons? This would create an incentive to identify and move people into a mental health treatment situation so that they aren't in and out of very expensive prison slots. The prisons themselves would, as a function of the profit motive, seek to move people into mental health treatment and not allow them to fall through the cracks once their sentence ends.
Is anybody already doing this?