MiraCare Group filed for bankruptcy protection after its fledgling psychiatric hospital project collapsed in the south suburban Chicagoland area.

The development is representative of the challenges that psychiatric hospitals face. Despite desperate demand for these services, they are increasingly less viable enterprises, leading to disinvestment in many instances.

The company, based in Palos Heights, Illinois, points to issues with timely payments from payers as the cause for the demise of the hospital, which served adolescents in Tinley Park, Illinois. Without the hospital in operation, MiraCare Group faces several lawsuits from the hospital’s vendors and is in default on a line of credit related to the project.

Documents filed by MiraCare Group in federal bankruptcy court state that “because of the delay of insurance carriers in paying over $1,000,000 in receivables to [MiraCare], the hospital facility was forced to shut down.”

The company still operates three outpatient mental health centers that offer psychiatry, psychoneurotherapy, individual and group therapy and testing services.

In 2018, MiraCare formed the corporation Mira Neuro Behavioral Health to acquire a property at 6775 Prosperi Dr. in Tinley Park and cover startup costs for the hospital.

“With no acute care hospital beds currently serving the youth in our community, our inpatient services will provide children and adolescents and their families with the treatment resources needed to recover from a behavioral health crisis, all in one place,” Christopher Higgins, founder of MiraCare, said in a December 2022 announcement, when the State of Illinois approved its licensure, allowing it to see patients.

It’s not clear precisely when the psychiatric hospital was shut down since its license was approved near the end of 2022. An attorney for MiraCare Group has not responded to a request for comment.

The three outpatient clinics employ about 40 staffers. That includes staff and contract mental health clinicians as well as non-clinical employees, the documents state. MiraCare Group filed for bankruptcy on Sept. 9. In later filings, the company disclosed that its revenue totaled $3.2 million from the start of the year to Oct. 1, $4.8 million in 2023, and $4.9 million in 2022.

Other documents state MiraCare has between one and 49 creditors, and $1 million and $10 million in liabilities.

While there is wide consensus about the limited access to psychiatric beds, articulating the issue is one of notable, if not sometimes pedantic, debate.

For example, The Treatment Advocacy Center states in a report released in January that for a community to maintain mental health the “beds needed lie between an absolute minimum of 30 beds per 100,000 population and an optimal number of 60 beds per 100,000 population.” Anything less would represent a shortage. The U.S. has about 18 psychiatric beds per 100,000 residents. A “moderate” shortage would see levels fall between 15 and 25 per 100,000. 

Earlier in the year, the Treatment Advocacy Center said that the shortage in psychiatric bed access dipped to historic lows as 19 states had fewer beds than they did in 2016.

A different study using predictive modeling established “an overall rate of needed beds of 34.9 per 100,000 population, or between 28.1 and 41.7,” depending on several community-level health factors. The same study found that 3% of states do not have enough psych beds, while 28% have levels higher than their needs. 

All the while, Behavioral Health Business tracks rashes of psychiatric hospitals and sub-units closed daily while others are opened or announced.

These types of facilities are especially difficult to operate because of low payer reimbursement. The American Hospital Association (AHA) estimates that, on average, inpatient behavioral health services are reimbursed at 34.3% less than the cost to provide them.

The bankruptcy shows the potential damage of payers not delivering reimbursement in a timely manner. While health plans dragging their feet with payments is a tale as old as time, more recent developments include payers failing to address claims or concerns about reimbursement at all, leading to a phenomenon some experts call “payer ghosting.”

Hospitals and health systems have, in part, gotten around some of the economic troubles of psychiatric hospitals by splitting the startup costs and management of these facilities through developing joint ventures. Companies that take this track include Acadia Healthcare (Nasdaq: ACHC) and US HealthVest.