St. Joseph's Hospital in St. Paul is adding inpatient psychiatric beds in an effort to address the critical shortage of mental health services in Minnesota — and hiring an experienced but controversial behavioral health company to manage them.

The HealthEast hospital is spending $7 million to renovate unused rooms and increase its total number of beds for mental health and chemical dependency treatment from 68 as of last summer to 105 by this July. Expansions will include beds for geriatric psychiatry patients as well as those in acute mental crises who are often stuck in hospital emergency rooms because there are no open mental health beds in the state.

"It's a huge need," said Dr. John Kvasnicka, HealthEast's vice president of medical affairs. "Patients are really suffering."

Universal Health Services, one of the nation's largest hospital management companies, will oversee patient care in St. Joseph's psychiatric units.

A series of changes in Minnesota's mental health system conspired in recent years to overwhelm the number of hospital psychiatric beds in the state — particularly the enforcement of a law giving priority to mentally ill jail inmates over hospital patients for space at the state's longer-term treatment facility in Anoka.

In a report in November, the Governor's Task Force on Mental Health likened the current mental health system to a "traffic jam" that only got worse as hospitals saw a 49 percent increase from 2007 to 2014 in patients showing up in emergency departments with mental health or chemical dependency problems.

The St. Joseph's adult mental health expansion is one of the largest in the state in recent years by hospitals, which claim that low insurance payment rates discourage investments in mental health. Other projects have included the opening of the 16-bed Sanford Behavioral Health Hospital in Thief River Falls and the opening of a geriatric psychiatry unit at Meeker Memorial Hospital in Litchfield.

Both the decision to use a for-profit management company and the choice of Pennsylvania-based UHS stood out in a state with a historical preference for nonprofit hospital services.

Partner investigated

U.S. Sen. Chuck Grassley, R-Iowa, and other members of Congress pressed for a federal investigation of Universal late last year, following an investigative report in which patients claimed they were given severe diagnoses so UHS-run hospitals could confine them to inpatient units and gain the maximum insurance money to treat them.

Universal is a Fortune 500 company that has been the subject of Justice Department settlements as well, including a $6.9 million deal in 2012 to resolve accusations of substandard psychiatric care in Virginia. The company's behavioral health division operates 225 facilities nationwide, but only one in Minnesota — the Pride Institute, which specializes in mental and chemical dependency disorders in gay and transgender patients.

HealthEast officials said they were aware of the recent allegations and prior cases against Universal, but found to the contrary that the company had innovative ideas about treating patients and keeping them from needing future hospitalizations.

Direct psychiatric care will still be performed by HealthEast workers, but Universal will provide management oversight and re-evaluate the hospital's admission and treatment policies, Kvasnicka said. "This is a complex clinical service to manage. … There's a lot of rapid developments in the field and new ways of approaching things. We know that UHS is out there and they are on top of all of that."

Are more beds the answer?

Whether more psychiatric hospital beds are the answer to Minnesota's mental health woes is another debate. The Wilder Foundation last August reported that one in five days that patients spent in inpatient psychiatric beds were unnecessary, largely because patients had stabilized but couldn't be discharged until they found openings in residential or outpatient "step down" programs.

The Minnesota Department of Health used this logic in 2007 when it advised the state Legislature against approval of a new PrairieCare psychiatric hospital in Woodbury — and argued that more outpatient services would address the demand for hospital beds.

That remains a concern, said Stefan Gildemeister, Minnesota's state health economist. "We need targeted solutions, and to not just say 'we need more beds.' "

Kvasnicka said HealthEast has invested in other areas, including a four-bed mental health stabilization unit in St. Joseph's ER that has kept some patients from needing inpatient admissions.

"I'm personally really proud of HealthEast," he said, "for stepping up and meeting the need."