Negotiations to add 40 mental health care beds at UC San Diego East Campus Medical Center, formerly Alvarado Hospital, have fallen through, with some disagreement on which side is responsible for the derailment. On Monday evening, San Diego County issued a short statement announcing that “UC San Diego Health has decided to end negotiations for a plan to implement a behavioral health care hub.” But Tuesday morning, Patricia Maysent, chief executive officer of the university health system, objected to that description. “I think it’s not right to say that UCSD pulled out of the deal,” Maysent said. “UCSD Health was on a timeline to try to get certain services done in a new hospital we acquired with fallow space, and everyone knew that timeline. “We agreed to a date; we extended that date twice; we got to last Friday and we still had no clarity on, really, any of the points. There had been a ton of work on both sides, a ton of work, but no clarity and we needed to make the decision to move forward and take care of our patients and our community and the demands that we have.” Implosion on ongoing negotiations ends what seemed to be a promising way for the county to add a significant number of critically needed beds for patients with severe needs for treatment more quickly than building new facilities on county-owned property in Hillcrest. The idea was seen as a clever way to accelerate the pace of treatment, even drawing Gov. Gavin Newsom to the facility, then still named Alvarado, in 2023 to announce Proposition 1, California’s $6 billion referendum on funding for mental health care infrastructure. Both sides seem to agree that Medi-Cal reimbursement rates were the main unresolved item. Citing the term sheet that was publicly disclosed this spring, the county was to loan UCSD “up to $32 (million) to cover capital costs for the build-out of the inpatient bed unit and (crisis stabilization unit)” to be created by remodeling existing floors at the East Campus with that cash repaid to the county “as long as loan repayment funds are recoverable through the rates for services paid by the county.” But an additional deal point required reimbursement for services rendered in new Medi-Cal-designated beds to cover the cost of operation, ensuring “that UCSD will not be operating the unit(s) at a loss.” Reached Tuesday morning, Luke Bergmann, the county’s director of behavioral health, said that rates were complicated by a change in how “per diem” Medi-Cal mental health care reimbursement is calculated. Hospitals have said for years that they lose money caring for Medi-Cal mental health care patients and the new system, the executive said, allows hospitals to receive payment for the actual costs they incur. “We were working very closely and through lots of very technical details with the UCSD team, and we felt that we were very close, if not virtually arrived at alignment, around how to calculate this cost in a way that is consistent with guidance from (the Department of Health Care Services),” Bergmann said. UCSD says its inpatient psychiatric services are “under-reimbursed by more than 35%.” Another significant part of the deal was for UCSD to apply for state funds from Prop. 1 to pay for at least part of the renovation. But the deadline to request such funds passed on Friday without UCSD making an application. Maysent said Tuesday that she did not feel comfortable asking for Proposition 1 funds until all questions about reimbursement, including the mechanism of repayment of the county loan referenced in the term sheet, were answered in writing. New rates, she added, would require state and federal approvals that have not yet been granted. “We still don’t have any sense of timeline around the state making a decision about the rate and the approval of the federal government,” Maysent said. She said the unused space at East Campus is needed for other aspects of the university health system’s operation, most immediately for acute rehabilitation services. Today, she said, this inpatient service for those recovering from significant medical procedures is not provided by UCSD, but is sorely needed. Both sides seemed truly unhappy that negotiations did not resolve more quickly. “I’m not trying to say anything negative about the county,” Maysent said. “I think we all wanted to get this done, but we have other pretty high demands on our beds right now, and I’m basically holding two floors fallow.” Bergmann said he is disappointed to miss out on an opportunity for the county, which is responsible for providing services to the region’s 1 million Medi-Cal beneficiaries, to work more closely with the region’s only medical school. “To have the county’s only academic medical center be deeply invested over the long haul in a partnership with the county’s behavioral health plan, I think would have had multiple evolving benefits over the years that a simple count of beds doesn’t begin to capture,” Bergmann said. Meanwhile, bed availability in locked behavioral health units is scarce. Bergmann said in the spring that such units have been running at 90% to 100% occupancy. Adding 40 beds at East Campus would have helped remove some of the capacity pressures in the short term, and Bergmann said the county will explore similar redevelopment opportunities with other operators. He said that the state’s new rate-making process, one that is designed to make sure that hospitals break even on mental health care for Medi-Cal patients, is expected to make more hospitals with unused or underused space willing to participate. “It’s not an embarrassment of riches, but there is some infrastructure that (an) additional inpatient acute site could be built into,” Bergmann said. “The rate limiters are our workforce, primarily, and we will be keeping an eye on any of those kinds of opportunities.” Maysent said that UCSD may still add additional mental health beds at East Campus even if it does not do so in direct partnership with the county. And, the facility will continue caring for those with Medi-Cal coverage in addition to those with other types of health insurance. East Campus already has 30 behavioral health beds in an existing psychiatric unit remodeled recently to serve seniors. That unit will continue operating, though Maysent said that the university plans to treat a broader age range of patients there in the future. UCSD planned to move about 30 existing psychiatric beds from UCSD Medical Center in Hillcrest to make way for new construction, but Maysent said the housing portion of the project that would have required demolition has been delayed, meaning there is less urgency to relocate those beds.