Will psychiatric hospital be built in St. Paul? It's up to state Health Department

The fate of a new 144-bed psychiatric hospital at the Bethesda campus in St. Paul rests with the Minnesota Department of Health.

Normally, the department advises the Legislature on whether to waive a construction moratorium and allow hospitals to be built. This time, the Legislature reversed the process — making a deadline vote at the end of the 2022 session to allow the hospital, but only if Health Commissioner Jan Malcolm approves.

The switch adds weight to the department's public interest review, which included a hearing last week at which dozens of people argued whether the $62 million project by Acadia Healthcare and Fairview Health Services should be allowed. It also gives final say to a state agency that opposed the last standalone psychiatric hospital proposed for the Twin Cities.

Whatever recommendation emerges this summer, it will be based on current needs and not past decisions, said Stefan Gildemeister, the state's chief health economist. "MDH's approach has always been ... to follow where the evidence leads. That is not changing in this review."

Nobody disputes that psychiatric hospitals are full and that people in mental crises are stacking up in emergency rooms. Minnesota was among five states in the 2020 National Mental Health Services Survey with inpatient psychiatric bed usage rates above 130%. Only 28 of 1,535 adult beds were available Wednesday, according to the Minnesota Hospital Association. None was in the Twin Cities. Six were in Fargo.

"We've had numerous families tell us they've just stopped trying go to the ER, because they've had such long waits," said Liz Franklin, associate director of behavioral health services for CLUES, a Latino nonprofit agency in St. Paul.

Adding beds is one solution, but that expands the most expensive level of mental health care and passes costs to Minnesotans. The concern of excess hospital capacity is why the state's moratorium exists.

State Rep. Tina Liebling, DFL-Rochester, found herself in the unusual situation as chairwoman of the House Health Finance and Policy Committee of voting against a multimillion-dollar mental health reform package because it loosened the moratorium. In addition to giving pre-approval to the Bethesda proposal, the legislation — which passed — allowed the construction of mental health hospitals at any other sites without review.

"This just builds up the highest cost and most intensive part of the system," she said. "You need to make sure the system is balanced."

The alternative is more outpatient and crisis response services, which in theory are cheaper and reduce the need for inpatient care. That rationale convinced the health department in 2008 to oppose a plan by a company now known as PrairieCare to build a psychiatric hospital for adults and children in Woodbury.

"With appropriate availability of intermediate resources, a significant number of hospitalizations could be avoided," the review stated.

Circumstances haven't improved. Suicides in Minnesota increased from 598 in 2008 to 830 in 2019, according to the Centers for Disease Control and Prevention. Suicides declined to 758 in 2020, but anxiety and depression rose during the pandemic.

A predictive model in November found that Minnesota is one of 12 states with insufficient psychiatric inpatient capacity — even with adequate outpatient care.

PrairieCare ended up building a pediatric mental health hospital in the west metro, receiving legislative permission despite the negative state review. Dr. Stephen Setterberg, the organization's founder, still wonders if the original proposal with adult beds was a missed opportunity.

"In my opinion, the situation is so dire in Minnesota that it seems ridiculous to oppose acute care expansion of any kind," he said.

Sanford Health received a supportive review in 2014 to build a 16-bed psychiatric hospital in Thief River Falls because shortages are more severe in rural Minnesota.

Fairview leaders argued that solutions don't have to be either inpatient or outpatient. The clinical partner of the M Health Fairview academic health system has added outpatient services already and created alternatives such as EmPATH units that divert ER patients and stabilize them without inpatient admissions.

A new hospital would offer a more healing environment with focused mental health and substance abuse expertise at a cheaper cost than a general hospital, said Laura Reed, Fairview's chief operating officer. "[It is] an example of the innovation required to meet the urgent health care need that we have seen grow over the last two years."

Fairview will have a 15% stake in the hospital, which will largely be run by Acadia. The Tennessee company operates 230 U.S. mental health facilities, but had its reputation dented by a $17 million federal settlement over accusations of fraudulent Medicaid billing.

Fairview in response to questions from the state said it has reduced inpatient psychiatric capacity at St. Joseph's Hospital in St. Paul from 92 beds in 2018 to 40 in February and will close the remaining beds next month. Total psychiatric capacity declined from 272 beds in 2016 between the Fairview and HealthEast hospital systems, to 232 in 2020 after they merged, according to the state's Health Care Cost Information System.

Critics questioned why Fairview couldn't just reopen shuttered beds.

"Fairview does have beds. They just are not filling those beds," said Laura Villavaso, a nurse at M Health Fairview's University of Minnesota Medical Center, in public testimony. Nurses represented by the Minnesota Nurses Association are opposed because the new hospital could use non-union labor.

Allina Health and HealthPartners leaders asked Fairview to at least keep existing beds open at St. Joseph's until the new hospital is built, because their east metro hospitals are going to feel the pressure from the reduced capacity.

The National Alliance on Mental Illness also opposes a standalone hospital without an emergency room because of its potential to cherry-pick insured or lower-intensity patients.

Fairview countered that 69% of its psychiatric admissions involve patients on Medicaid or other government programs, and that this rate won't change with the new hospital.

Fairview's Bethesda campus was being shut down in 2020 as a long-term acute care hospital when it was made into a COVID-only hospital and then a homeless shelter. Building there requires additional approval from the Capitol Area Architectural and Planning Board.

Fairview has a backup site in the east metro and wouldn't need a public interest review to build there because of the flexibility granted by the Legislature.