Psychiatric hospitals have been in a state of change for years. Now, they stare down a new slate of challenges that could rework how they do business.

But these facilities, the pinnacle of clinical capacity and severity within behavioral health, are just as relevant as ever despite the industry’s shift to more outpatient care and an increased focus on keeping people out of inpatient settings in the first place, Oceans Healthcare Chief Operating Officer Jeff Pritchard told Behavioral Health Business.

“There are people that go, ‘What do you try to do as a hospital guy?’ You try to keep people out of hospitals,” Pritchard said. “That’s still the mission. We still all want to maintain people in the community.”

Oceans Healthcare is a large behavioral health care system known for its Medicare-specialized psychiatric hospitals and similar facilities. It operates 48 locations across nine states. Founded in 2004, its services have since expanded to include partial hospitalization programs (PHP), intensive outpatient programs (IOP) and outpatient services.

At the beginning of the year, Oceans Healthcare announced it had acquired Haven Behavioral Healthcare. The acquisition of the Nashville, Tennessee-based system expanded its footprint into five new states and added seven facilities. Founded in 2004, the company is headquartered in Plano, Texas, and backed by Webster Equity Partners.

The psychiatric hospital space is closely tied to the national health care scene much better than other segments of behavioral health because of Medicare. Last week, the Centers for Medicare & Medicaid Services (CMS) announced a slight increase in the prospective payments for these facilities and tweaks to its quality reporting system.

Such tweaks are an example of a very turbulent operating environment that psychiatric hospitals have to traverse. On top of regulatory shifts, hospitals also have to navigate innumerable challenges at the facility level. The widely varied nature of the hospitals themselves and the communities they serve lead to huge spans between the best and worst performing facilities, as illustrated by updated data from CMS.

(The selections below are from a BHB podcast conversation, edited for style, length and clarity.)

BHB: Behavioral health is probably the most underappreciated, but I think, the most compelling space within healthcare right now. I want to learn more about you, and hopefully in a way that brings us all together. Why are you in behavioral health?

Pritchard: I’m a clinician by trade. I’ve been in the business for 30 years now. The Cliff Notes version of the long story is that I was in college for English. I thought that I wanted to do something with English. My dad was a coal miner, and he came home one day and said, “I’ve been talking to some guys at the mines, and what do you do with an English degree?” And I really didn’t know. I had no idea, but it was a lot of fun. I had to look around and really decide what I wanted to do.

I came upon social work; it was something that sounded interesting. It sounded like there was maybe more potential for me to be employed than in English. So, I followed that path a little bit and just loved working with people. I came to appreciate helping people and seeing folks, a lot of times, come in at their worst and be able to leave an office or a hospital or whatever and feel much better.

I’ve done everything from being a tech, working crisis and managing cases to being a therapist and being a lower-level manager, working my way all the way up through those places. I love, love, getting up every morning and doing this work. It’s very rewarding, and I wouldn’t trade it.

What does the strategy behind doing facility JVs generally look like when it comes to making deals with local health systems? What does that look like? Why does Oceans Healthcare do that?

One reason is on the fiscal side. You end up with a partner, and you defray some of that cost. That partnership gets you both invested in behavioral health. You’d mentioned earlier behavioral health and how important it is. These kinds of deals help to bring people to the table and give everybody some ownership in behavioral health, especially when that’s not their area of expertise. They bring us in as an expert. We go in as an expert, and we get a great partner in the community.

We do a lot of these where we look at if it makes sense to do a JV deal with the fiscal interest of a partner, or does it make sense to go into this as some kind of clinical community partnership and go that route. We’re pretty open to either when we go into communities.

I am curious when it comes to fiscal management and fiscal responsibility. Are facilities like these hospitals innately and easily profitable?

I wish. No. Innately and easily? No. These aren’t big margins in the grand scheme of things. I think that there are some states that are better than others and are more easily profitable where their rates are higher and they are more progressive in what they pay. That makes it better. We are a one-line service, for lack of a better phrase.

At an acute care hospital, I got ortho, I’m doing heart stuff down here, and I’ve got a cath lab over there — we’ve got inpatient. That’s what we got. And we have these two outpatient service lines and none of these services are at get-rich rates. People have become more expensive. The rates have not followed suit, which I think is where a lot of our advocacy efforts come in.

Our operators have to be very responsible. And they are. They’re fantastic. It’s not a complicated business. I would say it’s not the most complicated business. But, man, it is a hard business. We have to work every day. Our operators have to work every day to keep this thing on the rails like it should be.