Aurora Mental Health Center Cuts 111 Jobs Amid State Funding Dispute

Aurora Mental Health and Recovery is eliminating 111 jobs after state officials refuse to adjust its budget under Colorado's new funding model.

The safety net provider for mental health and substance use treatment in Aurora announced the layoffs last week after a series of negotiations with state officials failed to resolve financial disagreements.

The center expects to lose $6.5 million in revenue next year due to the new payment system and reduced Medicaid eligibility.

The 111 positions account for 14 percent of the center's workforce and include administrative staff, four licensed therapists, and employees who help clients transition from psychiatric hospitals to independent living.

The center also reported it must return $7.2 million to the state this year because it did not spend as much on care as predicted.

The repayment stems from changes to how Colorado pays mental health centers that serve low-income and uninsured residents. Under the new model, the state pre-pays for anticipated costs and then recoups any surplus at year-end.

Aurora Mental Health asked state officials in April whether it could avoid paying back the surplus. State officials at the Colorado Department of Health Care Policy and Financing said no.

The center notified the state labor department that it would reduce staff by 111 positions last week.

CEO Kelly Phillips-Henry said the center must make significant changes to expenses including staffing to survive a $13 million-plus financial hit.

We simply cannot afford a $13 million-plus hit to our bottom line and a future predicated on a break-even payment model without making significant changes to our expenses, including staffing, Phillips-Henry said in a news release.

The layoffs come after similar cuts at other community mental health centers across Colorado including WellPower in Denver and SummitStone Health Partners in Fort Collins.

Last year about 500 behavioral health care workers were laid off in three months from facilities including West Springs Hospital in Grand Junction.

Safety net providers that went through layoffs blamed those cuts mainly on fewer people eligible for Medicaid after a post-pandemic rollback.

Aurora Mental Health is the first center to point toward the state's two-year-old repayment model as a primary cause of current financial strain.

I do not think we will be the last, Phillips-Henry said in an interview Monday. I think there are a lot more to come. We are all going to be adjusting, cutting back, asking how we preserve the services that are our core mission.

State officials accused Aurora Mental Health leaders of financial mismanagement and said blaming the new state funding model is misleading.

Marc Williams, a spokesperson for the healthcare policy department, said the center's characterization of its financial challenges is completely misleading.

We know that Medicaid providers across the state are facing financial pressure and we are working with community partners to do what we can to provide support, Williams said. However their characterization of their financial challenges is completely misleading. It is unfortunate that Colorans will be impacted by their financial mismanagement.

State officials also dispute the center's reported repayment amount. Williams said the required repayment is about $5.7 million rather than the $7.2 million the center reported.

Governor Jared Polis also pushed back on Aurora Mental Health's claims that budget cuts drove the layoffs.

The assertion that these reductions are due to state and federal budget cuts simply is not true, said Polis spokesperson Eric Maruyama. Providers like Aurora Mental Health are paid a rate that is intended to cover their costs.

The state cannot afford to add an additional margin for providers like this one to cover profits above the actual costs of care, the spokesperson said.

Aurora Mental Health has been financially stable since making the cuts, Phillips-Henry said. The center will continue to fulfill services required as a safety-net provider.

About three-quarters of Colorado's safety net community mental health centers are operating at breakeven or a loss, according to a survey by the Colorado Behavioral Healthcare Council.

The majority of the state's about 20 centers are either on a hiring freeze or have eliminated staff positions.

In an April letter to the legislature's Joint Budget Committee, the Colorado Behavioral Healthcare Council asked lawmakers to take a serious look at the funding model.

This is not a request for new funding, the council wrote. It is a question of whether existing state investment is structured to support system stability, meet statutory obligations, and maximize available federal funding.

The council's CEO Kara Johnson-Hufford told The Sun that the financial instability is not just an Aurora problem but a question of whether Colorado has set up its funding model to sustain major state investments in behavioral health.

Colorado is missing out on tens of millions of dollars in federal Medicaid funding because of its rate structure, she said.

It is designed to recover cost, not sustain the system or allow providers to plan, invest, or retain efficiency gains, Johnson-Hufford said via email. That mismatch is starting to show up in tangible ways.