Why haven't we done this already? One reason I'm aware of is that mental health stigma makes it difficult to build new psychiatric hospitals. For instance, in Fresno County (again), the construction of a much-needed behavioral health facility was protested on the grounds that it would damage property values and endanger the surrounding community. This is, of course, just ignorant stereotypes about the kind of people that enter a psychiatric hospital. If we did not so frequently represent the mentally ill as violent and unstable, I expect there would be far less public opposition to the construction of these essential facilities.
We also need to address chronic understaffing throughout the inpatient psychiatric system. We do not have nearly enough psychiatrists as we need to treat the mentally ill. The average psychiatrist is much older than most other medical fields, and psychiatry is one of the least popular medical fields for med students (for many reasons, ranging from wanting to work on something that doesn't integrate the social sciences so much, to the perception that psychiatry isn't as prestigious as other fields in medicine). The nurse-practicioner model (advanced practice registered nurses who can perform many of the duties of doctors) will increasingly address this problem, yet it still remains.
With more hospitals, and more staff, we will provide better treatment, and save more money in the long-term as a result. Having a shitty psychiatric hospital just turns your hospital into a revolving door and increases costs later.