Private equity-backed group seeks to reopen mental health beds

A private, for-profit Texas-based organization is seeking to reopen St. Dominic Memorial Hospital’s behavioral health beds in Jackson, according to state Health Department records. 

Oceans Healthcare has applied to lease St. Dominic’s recently closed behavioral health beds and open its own separately licensed psychiatric hospital in Jackson. Oceans submitted its application in late October. 

In the weeks following St. Dominic’s decision to shutter its 83-bed behavioral health unit in June, advocates worried that people seeking mental health care would end up in jails or without help. Shortly after the closure, two hospitals reported having full beds and were unable to accept any more psychiatric patients. 

Meredith Bailess, senior director of marketing and communications at St. Dominic, referred all questions to Oceans. Oceans officials declined to answer any questions for this story. 

However, a records request revealed that the company has applied to reopen 77 inpatient adult psychiatric beds, with the remaining six licensed but unused. The organization’s application to the state Health Department says that the hospital is prepared to provide the same services to the community that were previously provided by St. Dominic. 

The firm’s application also includes a letter of support signed by Rep. Chris Bell and Rep. Earle Banks, two Hinds County lawmakers, as well as letters of support from St. Dominic executives, including Interim Market President Kristin Wolkart.

“It is no secret that Mississippi is facing a mental health crisis due to a lack of resources,” the representatives’ letter reads. “By approving this project, the Department of Health will enable those in my community and all central Mississippi families in crisis to obtain desperately needed healthcare closer to home.”

Eileen O’Grady with the Private Equity Stakeholder Project researches the impacts of the growing trend of private equity firms investing in health care facilities. O’Grady said while it’s generally a good thing that more behavioral health beds could open in Jackson, she is wary of any private-equity owned organization getting involved in behavioral health care. 

Massachusetts-based private equity firm Webster Equity Partners bought Oceans Healthcare in 2022. Webster Equity was founded in 2003 and is active in the health care industry. The organization’s website says it targets “companies with high-impact growth strategies that deliver the highest quality care.” 

As of June, the total market value of investments managed by Webster was $7.4 billion, according to the firm’s website. 

Private equity firms have shown growing interest in the behavioral health industry in recent years, according to a report authored by O’Grady. But because private equity firms are focused on turning a profit, patients often suffer as a result, her report concluded. 

“When I think about what they do and what the business model is, I think it can be boiled down to basically one thing: Generate the highest return possible over four to seven years,” she said. “Usually that means trying to double or triple their investment over a couple of years … That is a really short period of time to make that kind of money.” 

In order to turn that kind of profit, the firms have to make big cuts. That’s especially risky for behavioral health facilities, where vulnerable people expect to receive treatment. Instead, some private equity firms have hired untrained or unlicensed staff, have failed to hire enough staff or have neglected upkeep of facilities, according to O’Grady.

Laying people off and failing to pay adequate wages can lead to persistent understaffing, which can lead to hiring people with low levels of training, O’Grady said. At behavioral health facilities, this can create dangerous situations. 

She said there are some situations where firms can provide the financial backing needed to improve facilities. 

But she acknowledged that’s not usually the case. If the goal is making a huge profit quickly “in an industry where margins are already very thin, it is not improbable that some combination of those things can happen.”

“Generally speaking, what we’ve seen, especially in the behavioral health space, is alarming,” O’Grady said. “It is probably not a private equity firm’s fault that these hospitals closed, and it is good that they’re reopening, but I don’t think that private equity firms are the right companies to be managing behavioral health hospitals, and if they do, then there needs to be a lot of guardrails to ensure that these facilities are not just used to sort of line the pockets of rich people.”

Oceans has been increasing its presence in Mississippi. The first Oceans hospital in the state opened in Biloxi in 2019, and its second facility opened in Tupelo at the beginning of this year. Oceans’ facilities provide adult inpatient and outpatient mental health services, according to its website. 

Oceans’ application says the hospital will provide Jackson and surrounding communities with multidisciplinary psychiatric treatment for depression, bipolar disorder, schizophrenia, dementia and various other mental disorders. The application estimates that renovation of the unit will be completed at the end of March.