After finding serious safety and oversight failures, federal regulators are moving to cut off Medicare and Medicaid funding to Laurel Ridge Treatment Center — one of the largest freestanding psychiatric hospitals in the region, with a 330-bed campus in North Central San Antonio — a decision that could disrupt care for some of the city’s most vulnerable psychiatric patients.
The facility filed a legal challenge on Thursday seeking to halt the decision.
Medicare and Medicaid are government-funded health insurance programs that cover different populations. Medicare is a federal program primarily for people 65 and older and some individuals with disabilities, while Medicaid provides coverage for low-income individuals and is jointly funded by the state and federal governments.
The Centers for Medicare and Medicaid Services (CMS), part of the U.S. Department of Health and Human Services, notified the facility that it no longer meets federal requirements to participate in the programs, according to federal records.
The move follows a series of findings last year documenting patient safety risks, including incidents that regulators said placed patients in “immediate jeopardy” — the most severe level of deficiency.
But beyond the regulatory action, local officials say the decision raises a pressing question: Where will patients go now?
Safety failures cited by regulators
Federal inspection reports outlined widespread issues at the facility, including failures to maintain a safe environment, properly monitor patient risks and ensure adequate staffing.
In one case documented in an August inspection report, inspectors witnessed a patient self-harm with a razor blade that she had brought into the facility. The report stated the same patient had been found self-harming with a razor blade seven days prior to this incident.
Inspectors also noted the facility had been cited by CMS in April for not appropriately screening patients for contraband. They submitted a strategy to correct the issue, inspection reports stated that incidents of contraband had started to decline following implementation of the plan, going from 17 incidents in April to 12 in May.
Then in late May, the governing board of Laurel Ridge moved to revert the screening policy back to searching patients on the unit instead of on arrival, an action inspectors said “jeopardized patient safety, for decreased admission times.”
Contraband incidents proceeded to climb from 12 in May to 22 in June and 28 incidents in July with no further intervention.
The report also described a broader pattern of safety concerns inside the facility. Patients were found to have access to potentially dangerous objects, including cords, chemicals and other unsecured items that could be used for self-harm or to harm others. Inspectors also identified staffing gaps that at times left units without a registered nurse, raising concerns about adequate supervision and emergency response.
In addition, the facility failed to track and analyze incidents in a way that could prevent repeat harm, according to the report. Inspectors also noted unsanitary conditions and issues related to patient dignity, pointing to a care environment that did not meet federal standards.
Prior reporting by Public Health Watch found that three patients died inside Laurel Ridge in 2025, compared to just one death in the previous four years.
The cumulative failures, regulators said, meant the hospital could not meet federal standards for patient rights, quality oversight or nursing services.
What happens now
The letter from CMS indicates the termination is set to take effect on April 30.
After that date, Medicare will no longer pay for services for any patients newly admitted to Laurel Ridge. Patients who were admitted before the deadline can continue receiving covered care for up to 30 days after the termination, according to CMS.
Federal matching funds will not be available to the state for new Medicaid patients admitted after April 30, and coverage for existing patients is limited to the 30-day transition period.
Because Medicaid is administered by states with federal funding support, Texas health officials are responsible for helping coordinate care when a facility loses eligibility to participate in the program.
Thomas Vazquez, assistant press officer for the Texas Health and Human Services Commission, told Public Health Watch that state officials are already working to address that gap by working quickly to find placements for Laurel Ridge’s Medicaid patients.
It remains unclear how many patients will need to be relocated or whether other providers in the region have the capacity to absorb them.
The San Antonio Report reached out to the Texas Health and Human Services Commission but did not receive a response by the time of publication.
In a statement, Laurel Ridge CEO Ashley Sacriste said the facility disputes CMS’ determination that it does not meet Medicare participation requirements and has already taken legal action.
“We dispute the basis of this action, and although we had hoped to work collaboratively with CMS, we filed litigation on April 23 seeking to abate this decision,” Sacriste said.
Sacriste added that the facility is continuing to provide care to patients while it works through the regulatory process.
“We are taking all efforts to be deemed as a provider of choice and fulfill all obligations,” she said.
Federal regulations allow facilities to challenge termination decisions through an administrative appeals process.
Even with a legal challenge underway, the termination is scheduled to take effect at the end of the month.
If Laurel Ridge is able to halt or reverse that decision through the appeals process, Medicare regulations require the facility to correct the deficiencies identified by regulators and demonstrate they are unlikely to recur before it can be reinstated — meaning a legal action alone will not automatically restore funding.
Local concerns
For District 5 City Councilwoman Teri Castillo, the concern is not just about one facility — but what happens when a major provider serving low-income patients is no longer an option.
“Big-picture, we should be thinking about how we’re going to fill the gaps in providing access to high quality care,” Castillo said. “Seeing the folks who may have Medicaid or Medicare no longer being able to receive support at Laurel Ridge is concerning for a number of reasons.”
Among those reasons Castillo cited a high number of individuals who are uninsured and or can’t afford copays or deductibles, reductions to federal and state public health funding and a broader trend in San Antonio, where many residents already rely on emergency services when they cannot access routine care.
With roughly 70% of San Antonio Fire Department calls related to emergency medical services, she said the loss of a psychiatric provider could push more people into crisis situations — and into the 911 system.
“So a concern that we have is that we may see an increase in calls for medical care because folks won’t know necessarily where they can receive that care,” Castillo said. “It can have a cascading effect, but it is something that we should be following to see. Are we going to see an increase in calls and where will folks be going as an alternative to Laurel Ridge?”
Laurel Ridge, which opened its doors in 1987, provides inpatient and outpatient behavioral health services, including treatment for acute psychiatric crises, substance use disorders and specialized programs for children, adolescents, adults and veterans.
A total of 759 psychiatric beds are available in the San Antonio region, none are expected to be taken offline as a result of the funding cut. Other providers in the area offer various behavioral health services depending on patient needs, including the Center for Health Care Services and University Health, Castillo said.
Castillo added that access is not just about availability — it’s about awareness.
“We have a responsibility to share with the public what health care is available,” she said. “The concern is: are folks going to know where to go to access alternative care if Laurel Ridge was their primary facility.”
