A brief google search tells me that you're entirely correct. Looks like the episode I was thinking of was "Déjà Vu All Over Again", which I was sure ended with the implication that Backstep wasn't real and Frank was still in the institution. I probably assumed it was the last episode because I watched the series out of order in syndication.

You, know, that might be worth a new trope. Not Actually A Finale. I got the same surprise when I found out that "Future Schlock" wasn't the last episode of Rockos Modern Life- although in that case it was at least second-to-last.

Hm, now I'm kinda curious about that episode - it sounds like a good one. :) The closest we've got is Series Fauxnale for when the creators backed out of their ending for another season, though Not Actually A Finale could be a trope of its own (Buffy has like three fakeout endings, one for Season 3 and leaving high school, one for season 5 and leaving the WB, and then that creepy "Normal Again" ending).

I'm also kinda wondering if we have something like Wake Up In The Asylum, where the hero suddenly wakes up in an institution and everyone tries to convince them the rest of the show's a delusion. Frank's been through it, Buffy's been through it, Riker and Sisko have been through it, Total Recall played with it and there's gotta be other examples too... a ha, found it, Cuckoo Nest. I'll go ahead and add Seven Days to that trope and vice versa, since it was definitely in the show.