Negotiations to establish a 40-bed mental health care unit at UC San Diego Health’s East Campus Medical Center, formerly Alvarado Hospital, have ended in failure. The breakdown of talks has led to differing views on responsibility for the collapse.
On Monday evening, San Diego County released a brief statement revealing that UC San Diego Health had decided to terminate negotiations for the proposed behavioral health care hub. However, on Tuesday, Patricia Maysent, CEO of UCSD Health, disputed the characterization of the situation.
“I don’t think it’s accurate to say that UCSD pulled out of the deal,” Maysent said. “We were working within a set timeline to establish services in a new facility with available space, and everyone was aware of that timeline. Despite multiple extensions, by last Friday, we still lacked clarity on key issues. We had done a lot of work, but there was no final resolution. Ultimately, we had to decide to move forward to meet our community’s needs.”
The decision marks the end of a potential solution to address the county’s urgent need for additional mental health care beds. The plan had offered a more immediate option than constructing new facilities on county-owned land in Hillcrest. The proposal had even garnered attention from Governor Gavin Newsom in 2023, who visited the then-named Alvarado Hospital to announce Proposition 1, a $6 billion mental health infrastructure funding initiative.
Both UCSD and the county agree that unresolved issues surrounding Medi-Cal reimbursement rates were a key sticking point.
According to a publicly released term sheet from the spring, the county had agreed to loan UCSD up to $32 million to cover the capital costs of building the inpatient and crisis stabilization units at the East Campus. This loan was to be repaid as long as the county could recover the funds through Medi-Cal service reimbursements.
An additional condition of the agreement required UCSD to ensure that the new Medi-Cal-designated beds would be financially sustainable, meaning that the health system would not operate at a loss.
Luke Bergmann, the county’s director of behavioral health, explained that negotiations were complicated by changes in how Medi-Cal reimburses per diem mental health services. He noted that hospitals have long argued that they lose money on Medi-Cal patients, but the new system allows hospitals to be reimbursed for the actual costs they incur.
“We were very close to aligning on how to calculate these costs with UCSD, in accordance with guidelines from the Department of Health Care Services,” Bergmann said.
UCSD, however, stated that its inpatient psychiatric services are under-reimbursed by more than 35%.
Another critical element of the deal involved UCSD applying for state funds through Prop. 1 to help finance the renovation. However, the deadline for applying for those funds passed on Friday without UCSD submitting an application.
Maysent explained that she could not move forward with the Prop. 1 application until the reimbursement issues, including the repayment mechanism for the county’s loan, were addressed in writing. She also pointed out that new reimbursement rates would require both state and federal approvals, which have yet to be granted.
“We still don’t have a clear timeline on when the state will make a decision regarding the rates or when the federal government will approve them,” Maysent said.
She also noted that the unused space at East Campus was urgently needed for other services, such as acute rehabilitation, which is not currently offered by UCSD but is in high demand.
Both parties expressed frustration over the breakdown of negotiations.
“I don’t want to speak negatively about the county,” Maysent said. “We all wanted to get this done, but we have significant demands on our beds right now, and I’m essentially holding two floors unused.”
Bergmann expressed disappointment, stating that the county had hoped to forge a long-term partnership with UCSD, the region’s only academic medical center, to benefit behavioral health services. “This collaboration could have had evolving benefits over the years that go beyond simply adding beds,” he said.
The shortage of beds in locked behavioral health units continues to strain the system, with Bergmann noting that such units are operating at nearly full capacity. The addition of 40 beds at East Campus would have alleviated some of this pressure, but Bergmann said the county would now explore similar redevelopment opportunities with other facilities. He added that the new reimbursement model could encourage more hospitals with underutilized space to participate in such initiatives.
“It’s not an embarrassment of riches, but there is some infrastructure where an additional inpatient acute site could be built,” Bergmann said. “Our primary limitation remains workforce capacity, but we will continue to monitor such opportunities.”
Despite the setback, Maysent indicated that UCSD may still pursue additional mental health beds at East Campus, potentially without a formal partnership with the county. The facility will continue to serve Medi-Cal patients alongside those with other types of health insurance.
Currently, East Campus has 30 behavioral health beds in a recently remodeled psychiatric unit for seniors. UCSD plans to expand the unit’s services to treat a broader range of patients. While the relocation of 30 psychiatric beds from the Hillcrest campus had been part of the original plan, the delay in housing construction at Hillcrest has reduced the urgency to move these beds.
As the county seeks alternative ways to address the growing need for mental health services, the challenge of securing adequate funding and support for Medi-Cal patients remains a central issue.
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