Psychiatric hospitals are facing unprecedented challenges as they buckle under decades of financial pressure, with the situation escalating following the onset of the pandemic. A psychiatric hospital crisis is now more evident than ever, as discriminatory regulations, challenging payer relations, and inflation have placed several facilities in untenable positions. The number of closures in 2023 alone highlights the severity of the issue, with experts warning that systemic changes are urgently needed to protect these facilities and ensure they can meet the growing demand for care.
“It’s been a host of issues that over time have really made providing this level of care one of the most challenging things I think I’ve done in my career,” said Stuart Archer, CEO of Oceans Healthcare, an organization that specializes in senior behavioral health services. The pressure is mounting as psychiatric hospitals struggle to keep up with demand. According to the latest National Substance Use and Mental Health Services Survey (N-SUMHSS), U.S. mental health facilities are operating at an average utilization rate of 144%, while combined substance use and mental health facilities face a rate of 137%.
This psychiatric hospital crisis has only worsened in recent years. Nashville-based HCA Healthcare, for example, recently shut down an 18-bed psychiatric unit at Mission Oaks Hospital in Los Gatos, California, citing workforce shortages as the primary issue. The closure reduced the psychiatric bed count in Santa Clara County by 8.5%. Similarly, Cascade Behavioral Health Hospital in Tukwila, Washington, closed its doors in July, laying off 288 staff members and cutting 137 psychiatric beds. The hospital cited the broad range of challenges, including COVID-19-related disruptions, as the cause for its inability to remain financially viable.
The pressures facing these facilities are multifaceted. Many psychiatric hospitals, particularly those serving vulnerable populations, are forced to operate beyond their capacity. This psychiatric hospital crisis is not just a result of increased demand but also reflects the historical shift away from long-term residential care for individuals with severe mental illness (SMI). During the deinstitutionalization movement, the shift was made toward outpatient clinics and community-based services. However, this transition wasn’t fully supported by adequate regulatory frameworks or infrastructure, leaving psychiatric hospitals overwhelmed by cases that would have once been treated in a long-term facility.
The financial pressures on psychiatric hospitals are compounded by low reimbursement rates and the under-enforcement of federal parity laws that are meant to ensure equitable reimbursement for mental health care. As a result, providers often struggle to maintain a balanced budget, which makes it harder to retain staff and keep beds open. Many hospitals find themselves in a vicious cycle: they don’t have enough staff to keep all their psychiatric beds open, and without those beds being utilized, they lose the revenue needed to continue operations.
The psychiatric hospital crisis extends beyond just financial woes. Behavioral health services are often seen as a lower priority within healthcare systems, leading to cuts in funding and a lack of investment in outpatient care. In many hospitals, psychiatric services are considered secondary to physical health services, which leads to fewer resources and reduced staffing in psychiatric departments. In some cases, the long-term care needed by psychiatric patients is no longer sustainable, especially as many facilities face mounting debt from years of operating losses.
To make matters worse, psychiatric hospital crisis situations are often worsened by regulatory and payer trends that limit the amount of time a patient can stay in the hospital. For instance, the Centers for Medicare & Medicaid Services (CMS) often imposes limits on psychiatric care for beneficiaries, leaving hospitals to bear the financial burden of patients who need longer-term care but don’t qualify for additional reimbursement.
However, there is hope on the horizon. Despite these challenges, many stakeholders are pushing for reform. James Cassel, chairman and co-founder of Cassel Salpeter & Co., emphasized the need for governmental intervention to address the systemic issues that contribute to the psychiatric hospital crisis. Without such reform, he warns, communities will suffer as more facilities close their doors. Lobbying for better reimbursement rates and policy changes is essential to ensure that psychiatric hospitals can continue to operate and provide care to those who need it the most.
Additionally, some healthcare systems are exploring creative solutions, including joint ventures and partnerships. Oceans Healthcare, for example, has recently partnered with Ochsner Lafayette General in Louisiana to build a new $30 million behavioral health hospital. The new facility, slated to open in late 2024, will provide 120 beds for adolescents, adults, and geriatric patients, helping to alleviate some of the pressure caused by the psychiatric hospital crisis.
In conclusion, the psychiatric hospital crisis is a complex issue driven by a variety of factors, including regulatory constraints, workforce shortages, and financial pressures. While there are no easy solutions, advocacy and investment in mental health care can help reverse the current trajectory. It is clear that without reform, the strain on psychiatric hospitals will only continue to increase, leaving vulnerable populations without the care they need.
