I don't think the movie is based on the book, it's really a horror story, but what you posted, and the book mentioned makes sense. I'm sure it was horrible for those poor children.
We read a book about orphaned children placed in homes with nuns running them, when the leaders of the country decided mental institutes would bring in more money so they turned all the childrens' homes into mental institutes and kept the children as "patients" along with actual mental health patients. It was awful and I believe it was based on a true story. https://www.amazon.com/dp/B07257Z7QZ/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 The Home For Unwanted Girls by Joanna Goodman.
A real classic, and a cautionary tale about pretending to be insane to get a lighter sentence by going to a mental hospital instead of prison. How naive he was! The character of nurse Ratchet was both malevolent and chilling. A true horror story.
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