Nearly five months after California’s psychiatric nurse staffing ratios took effect, the state’s Medicaid agency is weighing a plan to send money that providers have sought to help absorb the mandate’s costs to programs further downstream. One psychiatric hospital CEO told Becker’s the state needs to start with the basics: a stable foundation of inpatient care for other services to build on.
John Meier, CEO of Aurora Charter Oak Behavioral Health Hospital in Covina, Calif., said that providers have pushed for Behavioral Health Facility Throughput dollars tied to Proposition 35, the voter-approved 2024 measure that made the state’s existing tax on managed care organizations permanent and directed how its revenue is spent, to go toward reimbursement, quality and access.
The California Department of Health Care Services proposed Sept. 18 to put $185.2 million of the program’s $300 million in 2025 funding toward three new investments: $65.3 million for certified wellness coaches, $60 million for flexible housing subsidy pools and $59.9 million for behavioral health data exchange grants. DHCS presented the plan to its Protect Access to Health Care Act Stakeholder Advisory Committee.
In its meeting materials, DHCS said the new investments build on investments proposed earlier that focused on expanding access and strengthening provider rates, including $17 million a year for behavioral health rate growth. The department argued each one eases pressure on behavioral health facilities. Early intervention can keep children out of crisis care, stable housing can free up emergency department and inpatient psychiatric beds, and real-time data exchange can help patients move to lower-acuity settings, according to DHCS.
The state’s emergency regulations, which took effect June 1, require freestanding acute psychiatric hospitals to staff at least one licensed nurse for every six adult patients and one for every five patients younger than 18. In March, the California Hospital Association estimated the ratios could cost more than $145.2 million statewide. Within days of the June 1 effective date, Kern, Contra Costa, Madera and San Diego counties had lost psychiatric beds, and the California Department of Public Health had granted temporary waivers to 23 hospitals.
Pressure on the state has mounted this month. In an Oct. 14 letter to the California Department of Public Health, five health and advocacy organizations, including the California Behavioral Health Association and the California Black Health Network, said the regulations have already cost the state nearly 70 inpatient psychiatric beds. The groups urged the department to review the rules and work with providers on revisions that preserve both patient safety and access.
In an Oct. 20 letter, the California Hospital Association and dozens of hospitals asked Gov. Gavin Newsom’s administration to put at least $275 million of the $600 million in throughput funds available across 2025 and 2026 toward enhanced reimbursement for Medi-Cal inpatient psychiatric services. Mr. Meier was among the hospital leaders who signed the letter. The signers described DHCS’ proposals as a reallocation of the funds and said that, despite more than a year of advocacy from hospitals, the department “continues to ignore investments in inpatient psychiatric capacity and reimbursement.” The letter put the cost of the staffing regulations at more than $275 million, nearly double CHA’s March estimate and roughly the amount requested.
‘A Maslow’s hierarchy of needs’
Mr. Meier said providers are not seeking higher rates to pad margins.
“We’re not asking for reimbursement rates in the pursuit of just improving the bottom line,” he said. “We’re at a point where we’re asking for improved reimbursement rates for covering losses that have really been accelerated as a result of the staffing regulations.”
Mr. Meier said he has not found much information explaining why the state would prioritize the downstream programs over rates, though he does not dismiss them. Wellness coaching and outpatient case management, he said, help people get healthy, stay healthy and reach the resources they need. The question is order.
“There’s sort of like a Maslow’s hierarchy of needs here,” Mr. Meier said. “We need to address the most immediate issues before we start looking at bolstering the system. We really need to keep the foundation of the system as healthy as we possibly can.”
He pointed to estimates that California is short nearly 3,800 psychiatric beds, the figure the California Hospital Association cited in an Oct. 21 news release, a gap he said is widening as the staffing rules discourage new providers from entering the market. CHA’s estimate breaks down to about 1,800 beds for children and adolescents and about 2,000 for adults.
Mr. Meier called the quality goal behind the ratios “a noble goal,” whether or not he agrees with the method.
The challenge, he said, is that the ratios arrived as an unfunded mandate in a sector that already operates on thin margins.
The mandate inside one hospital
“There’s no putting the genie back in the bottle,” Mr. Meier said of the ratios. “It’s something that we all are having to adapt to.”
Charter Oak, a 134-bed hospital in the San Gabriel Valley, runs at 96% capacity year-round. Mr. Meier said locked rooms and other operational challenges are the only reason it is not full. To comply with the ratios across three shifts a day, the hospital has hired about 100 nurses. Statewide, the rules require freestanding acute psychiatric hospitals to hire more than 1,500 additional licensed nurses, according to CHA’s Oct. 20 letter.
Nurses are the most expensive employees a hospital carries in volume, Mr. Meier said, so Charter Oak has had to reduce other resources to stay compliant and keep its doors open. That leaves nurses taking on tasks “they are not necessarily uniquely qualified through their registered nursing licensure to be able to perform,” he said.
He said the shift is among the factors accelerating turnover and attrition and leaving fewer new graduates and experienced nurses wanting bedside roles. Charter Oak has not seen a decline in safety, he said, but other hospitals have raised that concern, and nurses across the state are broadly dissatisfied with how their role has changed.
The Oct. 14 letter described the same pattern statewide: To comply with the ratios, many hospitals have cut behavioral health technicians and mental health counselors despite their roles in patient treatment and recovery.
The tradeoff matters because psychiatric care runs on a team, he said. In a single day, a Charter Oak patient may work with a behavioral health specialist, a licensed vocational nurse, a licensed psychiatric technician, a registered nurse, a physician, a pharmacist, an internist, a therapist, a case manager and a discharge planner.
“Heavily weighting the way in which we have to operate towards one of those functions creates other issues,” Mr. Meier said.
Ripple effects
Mr. Meier said the bed shortage reaches well past psychiatric hospitals. Patients waiting for inpatient psychiatric beds take up emergency department resources, lengthening waits for patients who come in with a broken ankle or another medical-surgical need.
Families also drive hours to reach an open bed, and ambulances cross county lines between Southern and Central California. Any delay can be harmful for a patient in crisis, he said, and distance makes it harder to involve families in treatment through visits and family therapy sessions — especially for children and adolescents.
“Being hospitalized particularly for the first time, can be a scary experience,” he said. “And their parents being 100 miles away, 150 miles away, while they’re working parents, makes it really difficult for them to be part of their treatment.”
The effects reach the broader community, too. A quarter of Charter Oak’s patients are homeless, Mr. Meier said, and when their psychiatric needs and social determinants of health go unaddressed, those challenges surface in neighborhoods, grocery stores and gas stations.
Where downstream programs fit
Mr. Meier said he would welcome supplemental services like those in the state’s proposal once the foundation is secure. His sequence: raise reimbursement to protect existing providers and draw in new ones, then add step-down and subacute providers, which he said Los Angeles County especially needs, then scale outpatient support that follows chronically ill patients after discharge.
Many of these patients face challenges well beyond their diagnosis, he said. Some carry decades of trauma. Others are homeless, out of work, without a car or unable to afford food. Outpatient support, whether it’s called a wellness coach or outpatient case management, can help manage those socioeconomic factors after discharge.
“You address their inpatient crisis stabilization, you get them into subacute care, and then you have someone who follows them in an outpatient setting,” he said. “Let’s say that they needed a ride to a job interview, or they need help putting together a resume, or they don’t have food this week, or they can’t pay for their medication. If we have people who can address all of those things, that’s how you get at solving these really complicated cases.”
Skipping the first step carries a cost, he said.
“If we allow for those challenges to go unaddressed over time, it’s going to make solving those challenges in the future much, much more difficult,” Mr. Meier said. “Without addressing the people who provide crisis stabilization, that’s going to create a very significant challenge here in the state of California.”
A near-term opening
Mr. Meier said providers had little chance to weigh in before the staffing rules were set. A state workgroup focused on safety, quality and access would have been an approach “every single person in my seat would be absolutely on board for,” he said.
He sees the managed care organization tax dollars as a chance to build that partnership now. DHCS also told the committee it expects federal regulators not to approve the Proposition 35 portion of the tax for 2027, because H.R. 1, the federal law signed in July 2025, bars taxes that fall disproportionately on Medicaid plans. The current tax structure is approved through Dec. 31, 2026. He said he is hopeful DHCS will reconsider and direct the money toward reimbursement, though that remains to be seen.
“Unilateral state regulation is not the way, and [the] unregulated healthcare industry is not the way either,” he said. “We need to work together to solve these problems.”
For Mr. Meier, the timing matters as much as the money.
“We can’t allow the system to get worse before it gets better,” he said. “We’re dealing with real people’s lives here.”
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