Profit Strategy: Psychiatric Facilities Prioritize Out-of-State Children

South Carolina children who need immediate, 24-hour psychiatric care risk being stranded for days or even weeks waiting for help, before being sent hundreds of miles from home. them for treatment.

When no psychiatric residential treatment beds are open in South Carolina, some children must travel across the Southeast to facilities in Florida, Georgia, North Carolina, Virginia, Tennessee, Alabama or in Kentucky – wherever a bed may be available.

The problem in South Carolina is not a shortage of psychiatric residential treatment beds, state agency leaders say, but that so many of the state’s 518 licensed children’s beds are occupied by patients other states. At last count, according to the state Department of Health and Human Services, about half of children assigned to a psychiatric residential treatment bed in South Carolina were non-South Carolinians.

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The reason comes down to facility bottom lines, which are determined by state reimbursement rates, since Medicaid often covers the care of these patients. South Carolina’s rate is about $330 a day, one of the lowest for such services in the country, said Deborah McKelvey, executive director of Windwood Family Services in rural Charleston County. North Carolina’s Medicaid rate is closer to $500 a day, she said, and other states pay up to $800.

“It’s like any business,” said McKelvey, whose psychiatric residential treatment facility is a nonprofit whose mission is to specifically care for patients in South Carolina. His establishment operates at a loss and partially fills the gap through fundraising.

The other seven state residential psychiatric treatment facilities for children operate as for-profit enterprises. Three are owned by Broadstep, a portfolio company of private equity firm Bain Capital. Some healthcare researchers have said such ownership arrangements could prioritize profits over patient care.

“More than any other part of the health services industry, private equity is pumping money into behavioral health,” said Eileen O’Grady, researcher for the watchdog group Private Equity Stakeholder Project. “We really don’t have a clear window on how much money they’re making. They are not required to basically disclose anything to the public.

The group released a report in February titled “The Kids Are Not Well” that outlines some steps that behavioral health facilities owned by private equity firms have taken to increase their profit margins in recent years, including reducing the personnel and the postponement of building maintenance.

“Despite horrific conditions at some youth behavioral health companies, their private equity owners have in some cases reaped huge profits,” O’Grady wrote.

Bain Capital and Broadstep officials declined to speak formally and did not respond to written questions.

The influx of these investments has helped to create a kind of arms race. South Carolina Medicaid increased its reimbursement rate April 1 to $500 per child per day in an effort to encourage for-profit facilities to admit more children from the state. The adjustment is expected to cost the Medicaid agency an additional $14 million each year, on top of the $20 million it already spends on residential psychiatric treatment for children. The money should free up space for beds, SC Health and Human Services Director Robbie Kerr said. But that may not be enough in the long run.

“We already know that our neighboring states are on the verge of raising their rates as soon as I do,” Kerr told a panel of lawmakers in January. “It will be an inflationary spiral.”

It is not uncommon for American children who need intensive psychiatric care to travel to another state for treatment. KHN recently reported that about 90 Montana children covered by Medicaid are being distributed to psychiatric facilities in 10 states. Similar trends occurred in Arizona, Minnesota and Oregon. Many states lack psychiatric beds.

Yet many psychologists and child protection experts suggest that children who receive this care closer to home will be more likely to succeed. This is mainly because patients can more easily maintain contact with their parents, caregivers and communities during stays that can last on average several weeks or several months.

Medicaid records show some of the South Carolina companies admitted children from as far away as Alaska and Vermont. Meanwhile, South Carolina ranks 50th among all states and DC — only North Carolina ranks lower — in the share of children with major depression who aren’t receiving treatment for it, according to the advocacy group Mental Health America.

Some children, left untreated, become violent and suicidal and eventually require care in a psychiatric hospital or residential treatment center. They may suffer from anxiety, depression or post-traumatic stress, or have a substance use disorder. In many cases, the pandemic has made their mental illness worse. It also made psychiatric bed space scarcer.

At New Hope Carolinas, a for-profit facility for patients ages 12 to 21 in Rock Hill, SC, 133 of 150 psychiatric beds were occupied by patients covered by outside Medicaid plans last summer, according to a report filed by the facility with the South Carolina Department of Health and Human Services. At Springbrook Behavioral Health in Greenville, a psychiatric residential facility specializing in children with severe autism, only one of 40 Medicaid patients was from South Carolina. At a Simpsonville facility called Excalibur-Venice, 41 Medicaid patients were from North Carolina and only 10 from South Carolina.

Excalibur-Venice is one of three South Carolina facilities that report to Broadstep, a Raleigh, North Carolina-based company backed by private equity firm Bain Capital’s Double Impact Fund. Broadstep’s footprint encompasses dozens of similar psychiatric facilities in seven states, according to its website, and Bain Capital is far from the only private equity player investing in behavioral health.

In its 2022 “Global Healthcare Private Equity and M&A Report,” Bain & Company — an advisory firm separate from the private equity firm but founded by the same businessman — reported that the pandemic presented opportunities for investment in behavioral health care.

“With the reduction in stigma of mental health services, combined with greater commitments from employers and payers,” the report notes, “the addressable mental health market looks set to grow over the next few years.”

Yet in the Carolinas, the need for psychiatric beds remains particularly acute. In mid-March, Bailey Pennington, spokesperson for the North Carolina Department of Health and Human Services, confirmed that 21 children in that state were on hold, waiting for a bed to become available at a facility in Carolina. from the North or from another state. . Nearly 250 North Carolina children covered by Medicaid were sent to an out-of-state psychiatric facility between mid-2019 and mid-2021, she said. And North Carolina, despite having twice the population and much higher Medicaid enrollment, has fewer child psychiatric treatment beds than South Carolina.

“I have probably five to 10 young people right now who could benefit from this level of care bouncing from placement to placement,” said Michael Leach, director of the South Carolina Department of Human Services.

In some cases, parents have abandoned their children because they can no longer manage their mental health needs, he said. Sometimes the police intervene, but the parents refuse to pick up their children. Children sleep in county offices or hospital emergency departments, he said, when psychiatric beds are unavailable.

Often, beds in South Carolina are technically available, but psychiatric facilities cannot retain staff to handle more patients. That’s when children can be sent out of state, Leach said. Nineteen South Carolina children in state custody were receiving out-of-state psychiatric treatment, Leach said in mid-March.

“I need (beds) more right now than I have access to,” Leach said. “It’s a real thing.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Along with policy analysis and polls, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization providing information on health issues to the nation.

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