Kathaleen, I'm so sorry.
I'm sorry to say you are right about the long term inpatient help, it takes so much, as in repeat hospitalizations in bad circumstances that most will never get there to long term inpatient help. And frankly I think it might not be a solution anyway, maybe it would though, because my son has never been in a long term facility.
First of all, your son is in no place to be able to support even himself let alone his children. I don't know what you do about that because my son, thankfully, has no children. But the reality of it is with untreated, or not treated well enough, bipolar and schizophrenia they could be twisted up in how they are ashamed of not stepping up to life but mostly don't have a view to anyone outside of themselves. None of it helps them to function in life. For the children, as my son does not have any, the only thing I can think of right now is to support the mother(s) and the children to find financial and social help within the system. Food stamps, housing assistance, electric, oil supplements ect., big brothers (because they need a strong male role model) and free health care including therapy, not sure what else.
As far as the manipulation goes, some hospitals are somewhat okay and others are a nightmare. Patients do learn what to say to get the h*ll out of there. Because just as you know the hospitals can't even count for something as mild as a band aid towards mental health, he knows this even more.
I can only tell you what my son has done, and frankly my son is in the middle of "the jury is still out" on if it will work for him. My son also went drug free and got connections from the local hospital for mental health assistance from a mental health non profit organization after a couple more hospitalizations. I had had my son removed from my home a year prior to his getting those first connections, but not his first hospitalization, by far. I feel he only was referred to them because he told them he was on his own, living on a friends couch, which he was, kind of. They gave him a social worker who helped him with food stamps and such. And then after a year of him couch surfing they found him a housing assistance apartment for mentally ill people. During this time my son was refusing to admit he had a mental illness, only said he had PTSD from his terrible upbringing, something he believed but I know the mental health organization knew better about because I made sure they had his history. By the way, HIPPA doesn't prevent you from sending them information, only from them giving you information.
At the apartment he then had a couple of more hospitalizations, which included psychotic episodes, 10 days each. After that he decided he does in fact have a mental illness and decided to get treatment. He doesn't want to end up in the hospital again, no matter what. He's now dealing with Intensive Out Patient(IOP) treatment, therapy along with medication trials with switching medications and titrating dosages up, as is usual. Some days he's okay, most days he's not, so far. But he is making progress and doesn't want to end back up in the hospital so he keeps pushing on.
I'm not saying to put your son out on the street, but if there's a way you could put him into a more uncomfortable situation as a living environment, it might be the best for him. My son did not know we paid for his "couch surfing", kind people were involved who at first thought they were rescuing him from a bad environment only to find out the truth of it. It became a situation where no money was worth it to them and they told him he had to find another place to live, dealt with that for a bit on their part, frankly I think because they didn't want to admit defeat. Luckily they never told him how we were involved. At least now it's all on him, as far as keeping the roof over his head goes with him taking care of his mental health through the non-profit. I don't know if my son will ever get to a place of relative mental health but I do know he's really wants to in order to move his life forward and is not feeling that subconscious comfortable feeling as if his life's comforts are up to someone else to provide. Even considering the assistance my son is receiving, he appreciates it, and won't apply for SSI right now, because he feels he "should" be able to work and take care of himself. He knows if that doesn't turn out to be true he will have to but wants to make it on his own now. He does have free medical care, which includes the outpatient treatment, I pay for his out of network therapist and to get him to doctors and such, but he also knows that's not indefinite.
This is just our story, a long one, and a long road to hopefully help you to come up with some ideas for your family.