More than £2 million of NHS cash is being spent caring for people with mental health problems in Brighton and Hove in private beds.
Health managers send 20 people each day into private ac-commodation because of the drastic shortage of public hospital beds.
South Downs Health NHS Trust, which manages mental health care in Brighton, Hove and Lewes, is urgently looking at ways to ease pressures including boosting staff numbers and finding residential accommodation for people with less serious problems.
Pressures on the system in Brighton and Hove are exacerbated by high rates of homelessness and little spare housing.
Andy Porter, director of mental health charity Mind in Brighton and Hove, said there were few alternatives to hospital beds when people found themselves in times of need.
He explained: "Not everyone with a mental health problem needs to go to hospital. They might need community support or short-stay accommodation when they are discharged. But there are no real alternatives to hospital care.
"A lot falls on the voluntary sector at the moment. The problem when services are very stretched is the trust has to be reactive to people in crisis rather than intervening before the crisis occurs."
Last month the transfer of patients from Brighton General Hospital to Westbourne Hospital, Hove, created five extra mental health beds.
In September three extra mental health nurses will start with the trust.
A new community team is also being set up to focus on patients who relapse frequently.
But there is still a dire shortage of care places. Last Christmas two private homes for people with mental health problems in Brighton and Hove closed, with the loss of 23 beds.
David Thompson, the trust's general manager of mental health services, said: "We are still trying to find alternatives to hospital admissions which would make admissions the last resort.
"On top of that there's the increasing problem of finding suitable accommodation for people when they are discharged, ranging from staffed houses to individual tenancies."
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