Hundreds will be released from New Jersey psychiatric hospitals to live independently in the community — in many cases years after they should have been — under a settlement agreement reached Wednesday.

The agreement settles a 2005 lawsuit brought on behalf of nearly 1,000 hospital residents who were cleared for release but remained in institutional settings because state officials said there were no appropriate services available for them in the community.

Attorneys for the residents argued that the state was lax in developing housing and in the meantime unnecessarily kept residents in psychiatric hospitals in violation of the Americans with Disabilities Act and the U.S. Supreme Court’s decision in Olmstead v. LC and EW. In that decision, the court said that states have an obligation to give people with disabilities the option to receive care in a community setting, where medically possible.

Advertisement - Continue Reading Below

Under the settlement agreement reached this week, New Jersey agreed to a five-year plan to provide community housing for 297 residents who have been ready to leave the hospitals since before July 1, 2008. The state will also create more than 1,000 new housing opportunities by 2014 for other remaining hospital residents.

That’s welcome news to residents, many of whom were ready for discharge within days or weeks, but remained hospitalized for years at great expense to the state. Psychiatric hospitalization costs about $220,000 a year, while community living typically runs less than $40,000 annually, advocates say.

“The longer someone is kept in an institution unnecessarily, the greater the risk of abuse and neglect. In order to promote wellness and recovery, it is important to return these individuals to the community at the earliest opportunity,” said Joe Young, executive director of Disability Rights New Jersey, which represented the residents along with the Bazelon Center for Mental Health Law.

State officials say they have already decreased the number of psychiatric hospital residents over the last four years by creating 800 new supportive housing situations. Today, the hospitals have about 1,900 residents, down from 2,300 in 2005.

“Everyday people are recovering in New Jersey’s mental health system. We have a lot of work ahead of us, but together we are heading in the right direction,” said Kevin Martone, deputy commissioner for the state’s Department of Human Services. “A person’s home is in the community, not in the state hospital.”