San Diego hospitals lose millions annually in psychiatric services. Against that backdrop, where do their financial obligations in behavioral health begin and end?

The San Diego County Board of Supervisors recently grappled with the question.

On June 26, the board decided against earmarking up to $14 million for a new psychiatric facility to replace the one that Tri-City Medical Center suspended last year. The proposal called for the hospital system to set aside land for the unit and run it.

Instead, the board voted unanimously to drop the dollar amount and let county officials negotiate with Tri-City on a psychiatric facility — and potentially other hospitals interested in building new mental health units.

Board Chair Dianne Jacob said the county footing the entire Tri-City construction bill would set a bad precedent, especially because the hospital system retreated in mental health services.

“This is a partnership that we would be creating with Tri-City, not a bailout,” Jacob said. “And that has to be really, really clear as we move forward.”

Tri-City last year suspended its 18-bed behavioral health unit after federal regulators demanded upgrades in the neighborhood of $7 million. Tri-City has cited low mental health reimbursement as another barrier to reopening the unit.

The health system posted a $10.6 million operating loss last year, and of that was a $5.4 million loss on psychiatric services.

Supervisor Jim Desmond brought the proposal before the board, which would have established 16 inpatient beds and 12 chairs for emergency psychiatric stabilization.

Desmond pitched the idea as imperfect but practical given pressing mental health needs. He said Tri-City offered a site already zoned for psychiatric care and likely free of community opposition.

“If you think putting up new housing is difficult, siting a behavioral health facility is probably almost impossible,” Desmond said. He added shortly thereafter:

“We need the hospitals I think as much as they need the county as a regional behavioral health solution.”

Public speaker Leigh Anne Grass, the chair of Tri-City’s board of trustees, thanked Supervisors Desmond and Kristin Gaspar for trying to find a path forward. But she indicated it’s the county’s job to provide certain psychiatric services.

“We look forward to continuing to assist the county with their responsibility to provide mental health care to the residents of San Diego County.”

Supervisor Nathan Fletcher said other hospitals have found a way to make behavioral health work despite not being profitable.

Larger hospitals have had an easier time absorbing the cost. Sharp HealthCare — the region’s largest private provider of psychiatric services — said it lost $11.4 million on psychiatric services. Despite this, financials show $198 million in overall operating income.

Smaller player Palomar Health in 2018 reported about a $14 million loss on psychiatric services. This swung the company into the red. Palomar posted an overall operating loss of $11.8 million.

The Tri-City item was part of a string of board agenda items on mental health. Notably, the board voted to approve $23.8 million to bolster mental health care, including crisis stabilization units outside of hospitals, in a bid to take the pressure off emergency departments and law enforcement.