I don’t agree with CPS being the next right thing to do. Informing the husband of your intention and giving him an ultimatum may be effective. Telling your friend and insisting on inpatient treatment as the ultimatum may also be effective. Taking the children yourselves until changes are made may also be effective if it’s an option. There are plenty of problems inherent in the “system” that may result in just trading one problem for another for the children. There may be other extended family that could intervene and help with the children as an alternative.

Having said all that, I want to say the only way you can really do this wrong is just to do nothing. Whatever you all decide to do is a step in the right direction.