Federal Medicaid cuts could deepen financial strain on hospital-based psychiatric services nationwide, many of which already operate at a loss and face closures, Stateline reported March 23.
Data from the American Hospital Association show 126 U.S. hospitals eliminated inpatient psychiatric units between 2023 and 2024. These services are typically loss leaders, often supported by more profitable specialties such as cardiovascular care, where physicians can generate revenue up to seven times their salaries.
H.R. 1 is estimated to reduce federal Medicaid spending by $911 billion over 10 years and up to 10 million people could lose coverage when combined with the expiration of enhanced ACA subsidies. Medicaid currently insures about 15 million people with mental illness — roughly 29% of the 52 million nonelderly adults with such conditions.
Beginning in 2028, new limits on state-directed payments will reduce reimbursement rates by 10 percentage points annually until they reach 100% or 110% of Medicare rates. The law also limits provider taxes, a financing mechanism states use to draw federal Medicaid funds.
Hospitals are expected to see more uninsured patients seeking psychiatric care. At Renton, Wash.-based Providence, which operates 16 psychiatric units, Medicaid and Medicaid HMOs are the provider for 42% of patients, while psychiatric units operate with about a 37% negative operating income. At Providence Regional Medical Center Everett, roughly 80% of psychiatric inpatients are covered by Medicaid, with average stays of about 16 days.
At the same time, workforce shortages persist. Nearly half of all 50 states and the District of Columbia were found to meet 25% or less of their estimated mental health workforce needs, with at least 14 states reporting “catastrophic shortages” in their psychiatric hospitals.
At the Becker's Fall Behavioral Health Summit, taking place October 20–22 in Chicago, behavioral health leaders and executives will explore strategies for expanding access to care, integrating services, addressing workforce challenges and leveraging innovation to improve outcomes across the behavioral health continuum. Apply for complimentary registration now.
