The venture capital-backed, serious mental illness-focused startup firsthand has laid off most of its staff in five states.

Company founder and CEO Samir Malik declined to specify the scale or the impetus of the layoffs. However, sources tell Behavioral Health Business that the company lost a UnitedHealthcare Medicaid contract that supported a major portion of the company’s operations.

“We continue to work towards our mission of delivering life-changing outcomes to individuals with serious mental illnesses,” Malik told BHB. “We have made the difficult decision to reduce our workforce to better serve those individuals and our partners nationwide. We parted ways with a number of valued team members who were committed to firsthand’s mission — and we are committed to working with them to ensure they can transition to similarly impactful careers.”

On Monday, firsthand summoned impacted employees to a last-minute virtual meeting led by Mailk, with Ananth Lalithakumar, firsthand co-founder, also in attendance, sources told BHB. Participants on the call said the news was broken with “compassion.”

Multiple people impacted by the move pointed to the uncertainty caused by GOP-led, Trump-endorsed potential cuts to Medicaid funding as the cause of the layoff, according to several public social media posts. Some said that the round of layoffs impacted “a lot” of staffers without specifying how many.

firsthand, founded in 2021, focuses on caring for people with serious mental illness (SMI) via a peer support model. It also provides care and benefit coordination to ensure that SMI patients can navigate the complicated health system. From a business perspective, the company relied on innovative, value-based care-like deals with payers to help address the needs of their members with SMI. It prioritizes the Medicaid sector, where need and health care costs are the highest.

BHB has heard from dozens of executives across the behavioral health landscape that these kinds of specialized or otherwise unique, one-of-a-kind payer deals are extremely difficult to land, especially for new organizations that don’t have a long history. Value-based care and other payment innovations are years-long endeavors, even for more traditional providers. For startups, ventures often need to sustain a prolonged period of cut-and-dried payer arrangements before they can land something more preferential. The loss of such a health plan deal would be disastrous to a highly specialized startup such as firsthand.

It’s not clear what other payers firsthand partners with. Its website states that it is contracted with the national managed care organization Molina Healthcare (NYSE: MOH).

So far, firsthand has been able to raise about $43 million. Its latest round was announced in February 2023. That totaled $28 million and was led by GV.