State Hospital Investments Correct the Pendulum Swing From Too Many Psych Beds to Not Enough

State hospitals are on the rise. Several states are collectively putting billions into safety-net hospitals with ties to both the civil and justice systems. At the same time, the private sector struggles to convert demand for services into business opportunities.

In the wake of Kennedy-era deinstitutionalization, public and private investment in psychiatric hospitals, which care for those with the most dire and acute behavioral health issues, has fallen well short of patient demand and need. Similarly, investment in community-based behavioral health and social services has not reached a level to either allow for care in lower-acuity settings or prevent them altogether.

“The pendulum might have swung from a point where we had too many beds and too many people institutionalized in the 1960s to another extreme where the community investment has not been there to keep people out of a fewer number beds,” Nelson Jarrin, senior vice president of state policy at the Texas-based Meadows Mental Health Policy Institute, told BHB. 


Meadows Mental Health Policy Institute is a nonpartisan mental health policy think tank. 

The situation leaves state administrations and legislatures looking for ways to intervene. Most of those actions exclude private-sector partners. Rather, these initiatives compensate for the private sector’s failure to meet the overwhelming demand while making up for decades of underinvestment.

Over the past seven years, Texas’ state legislature has appropriated just over $3.6 billion into state psychiatric hospitals and other community-based psychiatric bed initiatives. This is part of a larger effort to bolster the behavioral health economy in Texas. Earlier in the year, the Texas legislature allocated $11 billion to several behavioral health-related projects.


The second-largest state in the U.S., its roughly 30 million resident population is about the same size as the 19 least populous states in the country, according to 2022 census data

Public-private partnerships are included in these funding efforts but are few; most of the funding is dedicated to alleviating a severe shortage of psychiatric beds meant to rehabilitate those with connections to the justice system. These so-called forensic beds are often the exclusive purview of state hospitals and have experienced a dramatic transformation in who they treat.

About 30 years ago, roughly 70% of the patients in Texas state psychiatric hospitals were there for civil reasons, with the remainder committed for care while they were awaiting trial or were deemed incompetent to stand trial, Jarrin said. Today, the ratio has reversed, with forensic patients making up the vast majority of state hospital’s rosters.

“When you talk about private companies and private psychiatric beds, they generally want to stay in the civil space,” Jarrin said. “They don’t want to take anybody who has criminal charges or is found incompetent to stand trial, even though the treatment component is essentially the same for forensic patients.”

The shortage of forensic psychiatric beds has led to a 2,200-person waitlist within the justice system.

In instances where private organizations have partnered with state and local governments in Texas, private entities have had to take on beds for low-level forensic patients to alleviate the waitlist.

Some examples of partnerships with private organizations include Baptist Hospitals of Southeast Texas getting $64 million to add 72 beds to an existing campus and $102 million to complete the Texas Behavioral Health Center in Dallas.

The latter project includes the involvement of the University of Texas Southwestern Medical Center, which is affiliated with the state university system, as well as the UT Southwestern Medical School. State universities and medical schools offer compelling partners for reinvigorating state hospital systems. Oklahoma officials recently announced initiatives with some similarities to those in Texas.

Keeping state hospital investment in government family

Public universities and their affiliated medical schools and health systems already have the infrastructure and the know-how to partner with state officials on big-dollar, potentially systemically relevant investments.

The Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS) announced on Sept. 11 that it will partner with Oklahoma State University (OSU) to build a 330-bed psychiatric hospital at the OSU-Oklahoma City campus.

The facility will cost $147 million and provide 275 adult beds and 55 pediatric beds. Named Donahue Behavioral Health, the facility will replace Griffin Memorial Hospital, based in Norman, Oklahoma, and add 100 net new beds to the state hospital system. Doors are expected to open in 2026.

“Like many states, our state psychiatric hospitals are very old and take a lot of dollars in upkeep,” ODMHSAS Commissioner Carrie Slatton-Hodges told BHB. “We’ve been wanting to have services and facilities for persons with mental illness that rival the best care that can be received from physical care.”

The funds for the project come from the American Rescue Plan Act (ARPA) of 2021, a Biden administration stimulus funding and policy project meant to propel the country out of the COVID-era economic slump and reform several aspects of American infrastructure. It pumped billions into state and county government coffers. An ARPA-focused legislative committee championed the project.

Donahue Behavioral Health will not be a forensic hospital, Slatton-Hodges said. However, police will be able to get people experiencing a mental health crisis to this or other behavioral health urgent care centers run by the states.

“We have found over and over that people inadvertently go the criminal route if they don’t have resources readily available,” Slatton-Hodges said. “[Police officers] are much more likely to not move that person down a criminal path if those resources are readily available.”

Slatton-Hodges notes that the demands of patients and the ability of medical professionals to treat behavioral health facilities fundamentally changed what state psychiatric hospitals will look like now and in the future. In short, Slatton-Hodges says the era of warehousing those with disabilities is long over.

The new facility will include a significant urgent care and outpatient care offering meant to keep people at the right level of care rather than defaulting to warehousing people for all behavioral health issues.

While the deinstitutionalization movement may have overshot shrinking psychiatric beds, the need for beds has changed as well; states won’t need to offer as many thousands of beds for patients as they did decades ago.

“The right number of beds changed,” Slatton-Hodges said. “While we no longer need institutions or places for people to live separate from the community, we still need a place for people when they are experiencing acute symptoms, to be able to have those stabilized so that they can continue with their life within the community.”

Slatton-Hodges said that private investment into psychiatric facilities was lacking for adults but tended to appear more robustly for pediatric patients. She noted that while private investment supported broader spectrums of behavioral health, it often could not meet the present need.

“If you operate in the private setting, you’re not going to build something based on a high uninsured rate that will need that service,” Slatton-Hodges said. “It’s a long road for the private health systems to feel like psychiatric care for an adult population is a business that is viable… I don’t know that behavioral health will ever be as lucrative as, say, opening a cancer wing or opening a heart wing.”

Stepping into the private market void

The private sector of psychiatric care is somewhat enigmatic.

These facilities face immense systemic pressures, leading to several for-profit and nonprofit health care organizations shuttering whole facilities or divisions altogether. At the same time, several businesses are trying to crack the code to meet the immense need for psychiatric care in a way that makes financial sense, often through partnerships and joint ventures.

Still, while the private sector struggles with the business case of psychiatric hospitals, state governments often see themselves as the last line of defense for providing care. The issue is even worse for patients whose mental health issues may have led to violent tendencies or run-ins with law enforcement.

“There is very little bed capacity within the private sector; where else are forensic patients going to go?” Tyler Hemstreet, a Washington State Department of Social and Health Services (DSHS) representative, told BHB in an interview. “It’s only the state taking care of these people because, if it wasn’t us, they wouldn’t be in a private hospital.

“We take on the most complex cases, and we’re the end of the line for a lot of these patients.”

DSHS entered the private market to buy a facility that Acadia Healthcare Co. Inc. (Nasdaq: ACHC) shuttered in Tukwila, Washington. In August, DSHS bought the facility for $30 million, according to the Seattle Times.

The facility will convert to exclusively serving civil patients after they’ve resolved their obligations and care as forensic patients, Hemstreet said. The move adds more beds to the state hospital system. But, because of that, they will no longer be available to private patients. It prevents the hospital from going unused and serving no purpose in the local health care economy.

“While they (patients) are still getting some behavioral health care, the key role in the competency restoration evaluation is to send them back to court to face their charges,” Hemstreet said.

Companies featured in this article:

, ,