Payer Relations Enter a New Era
As behavioral health reimbursement challenges and capacity shortages intensify across the U.S., Universal Health Services Inc. (NYSE: UHS) is drawing a line in the sand. During a recent investor call, the company’s CFO Steve Filton made a pointed declaration: reimbursement rates must rise to meet the current cost of doing business—or payers risk losing their place at the table.
This strong stance marks a significant shift in the payer-provider dynamic in behavioral health care. Historically, providers have absorbed the pressures of labor shortages and underwhelming reimbursement structures. But today’s economic realities—particularly surging labor costs and inflation—are forcing providers to reassess long-standing payer relationships. This marks a pivotal moment in addressing ongoing behavioral health reimbursement challenges.
Labor Shortages and Reimbursement Gaps Collide
Filton described the company’s strategic pivot as a necessary response to a “capacity constrained” environment, primarily due to persistent labor shortages. UHS operates more than 400 inpatient and outpatient facilities, including behavioral health centers, acute care hospitals, urgent care centers, and more. Despite the breadth of its network, staffing remains a critical issue—especially within its behavioral health operations.
“We’ve just been unable to fill our vacancies for nurses, sometimes therapists, psychologists, even non-professionals,” Filton said, referring to essential mental health tech and support staff. This ongoing shortage not only raises the cost of labor but limits how many patients UHS can serve, effectively putting a cap on the company’s revenue and reach. These supply-and-demand constraints are central to the current behavioral health reimbursement challenges impacting providers nationwide.
Recognizing that certain payer contracts no longer justify the financial strain, UHS has begun a deep analysis of its lowest-paying contracts—both public and private. Medicaid reimbursements, already known for being lower than commercial rates, are under scrutiny alongside private payers who haven’t adjusted their payments in step with inflation and market demand.
Strategic Shifts in Patient Intake
In response to underpaying partners, UHS has begun to prioritize patients based on payer alignment. Filton was blunt: if payer organizations “are unwilling or unable” to meet fair compensation levels, UHS will redirect its services to partners who do. Already, the company is turning away patients in certain situations—not due to lack of demand, but due to lack of staff.
This approach reflects how capacity constraints are reshaping the way health systems respond to behavioral health reimbursement challenges. Rather than spreading resources thin, providers like UHS are taking control of their payer mix to ensure that care delivery remains both financially viable and clinically sustainable.
Financial Strain Reflects in Q1 Results
UHS’s Q1 2025 financials reinforce the impact of these pressures. Patient days in behavioral health facilities fell by 1% year-over-year—a small percentage drop, but one with significant revenue implications. The volume decline was directly tied to staffing limitations, which also forced the company to increase reliance on higher-paid agency workers.
Marc Miller, UHS CEO and president, addressed this during the company’s Q1 earnings call, attributing part of the enterprise’s disappointing results to elevated labor costs, particularly in behavioral health. As agency wages rise, they erode profit margins and highlight the limitations of outdated reimbursement contracts.
To ease pressure, Filton said UHS is actively exploring new staffing models, including shifting more care responsibilities to licensed practical nurses (LPNs) and licensed vocational nurses (LVNs). While these changes aim to optimize staff use, they’re also a reactive measure to broader behavioral health reimbursement challenges that demand systemic payer reform.
Acadia Healthcare Echoes the Message
UHS isn’t alone in demanding more from payer partners. Acadia Healthcare Company Inc. (Nasdaq: ACHC), another major behavioral health provider, is also adjusting its reimbursement strategy. CFO David Duckworth said the company is working closely with commercial and managed care payers to renegotiate rates, acknowledging that inflation and staffing issues have reshaped the economics of care.
Like UHS, Acadia is battling workforce shortages that are constraining patient volume. Duckworth emphasized the importance of ensuring staffing issues remain temporary and that the company continues to invest in recruitment and retention to meet high demand across its markets. His remarks reflect growing industry alignment in addressing behavioral health reimbursement challenges head-on.
Duckworth also noted that CMS (Centers for Medicare & Medicaid Services) tends to lag behind commercial payers in updating rates—a trend that further complicates the path forward for providers focused on publicly insured populations.
A Turning Point in Behavioral Health Reimbursement
The actions taken by UHS and Acadia signal a larger industry reckoning. Behavioral health providers are no longer willing to absorb rising costs without parallel increases in reimbursement. The days of passive acceptance are over—replaced by strategic decisions about which payer relationships are sustainable and which are not.
This transformation could have ripple effects across the behavioral health sector. As more providers reevaluate payer relationships, insurers will be forced to respond. Those that fail to act may find themselves unable to secure contracts with the country’s most capable and in-demand treatment facilities. The current behavioral health reimbursement challenges are, in many ways, a market correction long overdue.
At the same time, patients may also feel the impact—particularly those relying on low-paying insurance options. If reimbursement fails to keep up with provider needs, access to care may become even more limited for vulnerable populations, despite growing national awareness of the importance of mental health treatment.
What Comes Next?
As UHS and its peers continue to adapt to the shifting landscape, the pressure on payers—especially Medicaid and managed care plans—will only intensify. If rates don’t improve, more providers may follow suit, turning away unprofitable contracts and investing instead in systems that reward quality care and operational resilience.
Ultimately, the shift underway isn’t just about dollars—it’s about the long-term viability of behavioral health care delivery in America. With demand at an all-time high and staffing resources stretched thin, addressing behavioral health reimbursement challenges is no longer optional. It’s essential.
