Other forms: madhouses
A madhouse is an old fashioned and derogatory word for a psychiatric hospital. It was once quite common to talk about mentally ill people being sent to the madhouse, but that would be offensive today.
While the many terms for psychiatric hospital (or the archaic insane asylum), including madhouse and funny farm or loony bin are no longer an acceptable way to talk about mental health care, most of them are commonly used to informally describe confused or chaotic situations. It would make sense to describe a roomful of eight year-olds running around and screaming happily as a madhouse, for example.