Danis Group construction crew members preparing the site for a 197-bed behavioral care hospital along Dolwick Drive in Erlanger are expected to complete work on the building foundation early in November.
However, not a shovel of dirt would have moved on the site without first laying a foundation of another kind, a new financial structure that allows for-profit SUN Behavioral Health and nonprofit St. Elizabeth Healthcare to cover the $40 million cost of the bricks and mortar as well as the long-term operating costs the hospital.
A major change in federal regulations, explosive growth of the number of Kentuckians who have healthcare coverage through Medicaid, and increased demand for psychiatric and substance abuse services have combined to make the project financially feasible, executives with SUN and St. Elizabeth said in recent interviews.
When complete – estimated now for early 2018, after initial projections of fall 2017 – Northern Kentucky Behavioral Health Hospital will allow the region to keep pace with mental health hospital construction that’s been underway elsewhere in the state in the last few years.
The commonwealth spent nearly $130 million to build the 239-bed Eastern State Hospital in Lexington, which opened three years ago and is being operated by University of Kentucky HealthCare at a reported annual cost of about $45 million. That new hospital replaced one that dated to 1824 and had been the second oldest continuously operating psychiatric hospital in the country.
Behavioral health facilities ranked second among specialty hospital construction categories in 2014 and 2015 surveys by Health Facilities Management magazine. In 2015, 9 percent of respondents reported behavioral health expansion projects were under construction, and 11 percent had projects in planning.
Need exceeds care capacity nationally after years of public mental health funding cuts, according to a Hospitals & Health Networks magazine cover story in 2015, which reported general hospital emergency departments “have become a major component of the nation’s de facto behavioral health system.”
While a fourth of Americans experience a mental illness or substance abuse disorder annually, the American Hospital Association said, only 27 percent of community hospitals have inpatient psychiatric units.
More capacity, even bigger need
In Western Kentucky, the 34-bed, $5 million Lourdes Behavioral Health Institute in Paducah opened in March 2015. It occupies one floor of the 264-bed Lourdes Hospital, a Mercy Health system facility that draws patients from 12 counties in four states.
Lourdes Behavioral Health Institute was built by Danis, the same Dayton, Ohio, construction company that is the general contractor on the Erlanger project.
At this point, the state has not been informed about any plans to build other new psychiatric or chemical dependency facilities, according to Diona G. Mullins, executive advisor in the state’s Office of Health Policy.
Under former Gov. Steve Beshear, however, the number of Kentuckians eligible for Medicaid increased by nearly 50 percent to more than 1.3 million as the state worked closely with the federal government after the Affordable Care Act or “Obamacare” was enacted in March 2010.
Medicaid expansion dramatically deepened the pool of people who could be covered for psychiatric illness or substance abuse by Medicaid, a federal program created in 1965 to offer healthcare to people who couldn’t otherwise afford it.
Then just five months ago the federal government’s Centers for Medicare & Medicaid Services reversed itself on a 51-year-old regulation that had prohibited Medicaid payments for mental healthcare for adults in institutions with more than 16 patient beds.
However, Gov. Matt Bevin, who made opposition to Obamacare a key element of his campaign last year, has proposed major revisions to Kentucky’s Kynect program that helped more than 440,000 people enroll in Medicaid in recent years. A spokeswoman for the state said Bevin’s proposal would not impact funding for mental health.
“One thing in the program that he wants to preserve is the funding for mental healthcare,” said Jean West, communications director for the state’s Cabinet for Health and Family Services. The governor, she added, hopes actually to expand mental health care throughout the state.
St. Elizabeth Healthcare officials said behavioral care topped their most recent community needs survey and that their referrals of Northern Kentucky residents have been comprising a significant portion of the overall patient population at Eastern State Hospital.
Steve Page, president and CEO of SUN, which is based in Red Bank, N.J., said the revised regulation on Medicaid payments clears the way for better access to psychiatric and chemical dependency care, both of which are in high demand for a variety of reasons, including the heroin addiction crisis that Kentucky and other states face.
Treatment costs less than non-treatment?
“The number of people who are insured in Kentucky before and after the adoption of the Medicaid expansion is really, really dramatic … and Kentucky really led the effort (in the U.S.) to sign newly eligible citizens up for Medicaid,” said Page, adding that he hopes there’s no effort to cut the Medicaid program in Kentucky.
“I can speak to mental health and substance abuse disorders specifically,” Page said. “When our patients aren’t getting treatment, really, the cost to society is higher. That’s the bottom line. … I think if people are in treatment, hopefully they can get to a point where they get treatment on an outpatient basis and they’re lowering the cost to Medicaid as well.”
That translates to fewer tax dollars.
“So the (effect of the) access change is now patients who have managed Medicaid (coverage plans) don’t have to go to a unit within a general hospital (for care). They can go to a freestanding psychiatric hospital, and so it opens up a lot of beds for a population that is pretty substantial and, to date, had real challenges finding services,” he said.
Medicaid in Kentucky is classified as a managed system, meeting one of the criteria in the revised federal guidelines. Another critical key is that the 197-bed facility being built on a high-visibility site just west of I-71/75 meets the federal regulator’s definition of an “Institution for Mental Disease.”
“The reason St. Elizabeth was interested in inviting a partner to come in and to focus on mental health and substance abuse services is that they were having challenges keeping up with the demand,” Page said.
The change in the rule should pertain to virtually everyone in Kentucky who is covered by Medicaid, said Mark J. Covall, president and CEO of the National Association of Psychiatric Health Systems, which lobbies for behavioral health providers from its offices in Washington, D.C.
Covall said it’s difficult to project how many people might take advantage of the coverage in Kentucky or elsewhere in the country. But there’s plenty of data that predicts how many people might need psychiatric care.
Big impact on access, quality of care
“What we know about this broadly is that about 5 percent of the American population has a severe psychiatric illness in a given year,” said Covall, adding that the percentage is higher among the Medicaid population.
Five percent of the state’s Medicaid population works out to about 65,000 people.
Page said the new hospital would have a dramatic impact on both the availability and quality of service in the region.
In recent years there was a substantial gap between the number of beds that had been approved by state regulators and the number of beds actually available for patients.
St. Elizabeth and NorthKey Community Care had received the certificate of need approvals from the state, but they hadn’t put them into use, Page said.
The state’s Office of Health Policy must approve a “certificate of need” for healthcare projects so that facilities aren’t duplicated needlessly and that supply and demand are in balance.
Page said 99 of the 197 beds at the new hospital – 66 approved for St. Elizabeth and 33 licensed to NorthKey in Covington – have been approved by the state in the past but exist only “on paper.” Those 99 beds will be available at the new hospital and will have the impact of doubling the availability of service in the region, he said.
All 197 are classified as “existing beds” that have been approved in the past for adults and children and do not represent an increase in the psychiatric or substance abuse beds available in Northern Kentucky. Bed capacity is being transferred from six other locations in the region to the new facility.
There are a multiple reasons the 66 beds were not in use, said Benita Utz, vice president and chief nursing officer for several of St. Elizabeth’s seven hospitals in Northern Kentucky. They had been approved for a prior St. Elizabeth Hospital location in Covington that was replaced by a new hospital in Edgewood. The need for the mental health beds didn’t exist when Edgewood opened, and they were never put into service, Utz said.
“Those beds were leftover from the old north unit (in Covington) and again, that is why we did this,” Utz said, explaining one reason why the hospital partnered with SUN. “We have to find real estate we have to find a place to use the beds.”
Drug-addiction care No. 2 need
The hospital construction also responds directly to the Community Health Needs Assessment and Implementation Plan completed for the hospital last November, Utz said. That needs assessment showed mental healthcare and drug-addiction treatment were the two top priorities in the region.
“I think that you’re going to find in most areas (of the country) that behavioral health is becoming the No. 1 problem,” Utz said. “You’re going to find that in most large areas and even in the smaller ones.”
Despite all the attention about the heroin abuse crisis in Kentucky and violent tragedies linked to people with mental health problems elsewhere in the country, raw numbers in Kentucky indicate existing behavioral care services are not fully utilized.
The state hospital utilization report for last year shows there were nearly 48,000 psychiatric hospitalizations in 2015, an increase of about 5,500 from 10 years earlier. The state’s report said the occupancy rate for psychiatric hospitals was under 44 percent. The utilization rate for facilities in Northern Kentucky was slightly lower, the state figures show.
But one of the reasons for the low utilization number may be how data is gathered.
“The annual utilization reports calculate occupancy based on the number of inpatient days reported by each facility for the year and the number of licensed beds at each facility. It is accurate that licensed beds may include beds that are not operational at this time,” according to Mullins in the Office of Health Policy.
Low utilization also can reflect whether care is being covered by insurers – whether private companies or government-backed public programs such as Medicaid. People are far more likely to seek help when they know the cost will be covered by insurance, Covall said.
More early care, fewer emergency visits
Both Page and Utz said the new hospital should dramatically decrease the number of patients who wind up in the emergency room with psychiatric problems because they have not gotten access to early-stage care.
“Right now, most of the patients in the behavioral health areas are there because they were brought in by police … or brought in through an ambulance and they’re out of control or they’re suicidal,” Utz said. “Too many people are brought in when they reach crisis state.”
Friends or relatives also drop off people at the emergency room because they don’t know what else to do.
One innovative feature of the new hospital will be physical flexibility, an ability to tailor space in the hospital for a specific group of patients, Utz said. Current plans call for a dozen different groups of patients, including veterans who suffer from post-traumatic stress disorder after serving in the military.
Although the project originally had a $31 million price tag, the project is now estimated at about $39 million and could edge up between $40 and $45 million, Page said.
The Northern Kentucky hospital is among several mental health facilities Danis Group has built, according to Nick Hoyng, who handles business development for the company through its Cincinnati office.
The company built the Mercy Hospital Clermont Behavioral Health facility in Batavia, Ohio, and is handling a similar project for the University of Cincinnati, Hoyng said. “We kind of have a niche for these kind of facilities,” he said.
Danis is working for the Woodbury Corp., a real estate development firm in Salt Lake City, Utah, that will build the hospital and then lease it to the St. Elizabeth/SUN partnership, Page said. SUN has a 75 percent stake in the project while St. Elizabeth owns 25 percent. ■
Greg Paeth is a correspondent for The Lane Report. He can be reached at [email protected]