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SAN ANTONIO — Faced with termination of its contract to provide Medicare and Medicaid services, Laurel Ridge Treatment Center is warning of “massive layoffs” and likely closure of the state’s largest psychiatric hospital.
The center alerted employees Monday that 648 of the hospital’s 659 employees would be laid off June 26.
Company officials asked a federal judge last week to temporarily halt the termination — which came after three patient deaths in 2025 and other patient-care issues — to give them time to challenge the decision and make improvements, if needed. Public Health Watch first reported the termination notice and the deaths on April 17.
“Termination of Laurel Ridge’s Medicare provider agreement will trigger a cascading loss of virtually all of its payer contracts,” the company stated in federal court documents. “The termination will effectively shutter the facility, displacing all of its patients, eliminating hundreds of jobs, and leaving San Antonio, along with one of the nation’s largest military installations, without its most critical psychiatric care provider.”
U.S. District Judge Jason Pulliam denied the request Tuesday afternoon.
“Beyond the concern about Plaintiff continuing to operate with potential major deficiencies, there is a public interest in ensuring that Medicare funds go only to qualified providers,” the judge wrote in an order.
Laurel Ridge filed a lawsuit April 23 against Health and Human Services Secretary Robert F. Kennedy Jr.; Dr. Mehmet Oz, administrator of the Centers for Medicaid and Medicare Services (CMS); and the Texas Health and Human Services Commission, which conducted the inspection that led to the recommendation to terminate the contract.
Officials with Laurel Ridge and the state Health and Human Services Commission did not immediately respond to requests for comment.
CMS’s Dallas regional office notified the hospital of the termination in an April 15 letter, citing regulatory violations that posed “immediate jeopardy to patient health and safety.”
“Psychiatric hospitals must … be free of hazard to patient health and safety in order to participate as providers of services in the Medicare program,” according to the letter, sent to Laurel Ridge CEO Ashley Sacriste from the Dallas office.
Laurel Ridge contends in court documents that the state commission made “incorrect factual findings and applied incorrect legal standards” when surveying the facility. The hospital has started an administrative appeal process to challenge CMS decision, but the process takes an average of more than three years.
“The consequences of termination of Laurel Ridge’s Medicare participation will be catastrophic and irreversible,” according to the lawsuit. “Laurel Ridge will be forced to close the entirety of its inpatient services — a facility that has served the San Antonio community for nearly 40 years … The closure will result in the layoff of nearly all of the facility’s 659 employees and 22 psychiatrists, the loss of approximately $48.5 million in annual payroll, and the lost benefit of over $10 million in capital improvements made since 2025.”
The hospital, which opened in 1987, has 330 beds, including 208 acute inpatient beds and 80 dedicated to the military community. Another 42 beds are set aside for children under age 18. The facility had 10,340 inpatient admissions in 2025 and provided outpatient services to more than 25,000 people.
A dozen employees interviewed by Public Health Watch traced the alleged violations to policies implemented by Sacriste after she took over as CEO in June 2024. The facility had no “immediate jeopardy” citations from 2010 to 2024, its lawsuit says.
A Public Health Watch review of 911 calls made from Laurel Ridge since 2021 also shows that monthly calls for “assault” or “assault in progress” cases nearly tripled after that date.
State inspectors, who contract with the federal government to evaluate compliance, cited Laurel Ridge for several “immediate jeopardy” violations in 2025 and another one in February. The facility’s lawsuit says it spent $10 million to comply by replacing seclusion rooms and nursing stations, providing additional personnel training on patient restraint and seclusion, updating communication policies and creating a training curriculum on abuse, neglect and exploitation, among other things.
State officials still found the facility out of compliance, however, and proceeded with plans to terminate the contract. Laurel Ridge said in court documents that officials saw an abrupt loss in patients, from 175 to 85, after the notification became public.
The lawsuit says that Laurel Ridge is one of only four stand-alone, inpatient psychiatric hospitals in San Antonio, and accounts for about 40 percent of the total inpatient beds. It notes that in addition to losing funds for Medicare and Medicaid patients, Laurel Ridge would lose patients with private insurance. Many private insurers require hospitals to be enrolled in Medicare before they will pay for services.
“Laurel Ridge is an integral part of the mental health service delivery system in Bexar County and surrounding areas,” according to the lawsuit. “Nearly a third of Laurel Ridge’s patients are part of the military community.”
The Center for Health Care Services (CHCS), Bexar County’s mental health authority, has been working with the Southwest Texas Regional Advisory Council and other hospital partners in anticipation of the loss of psychiatric beds at Laurel Ridge, said Jelynne LeBlanc Jamison, the CEO and president of CHCS.
CHCS officials are concerned that emergency rooms could be inundated with psychiatric patients, she said.
In 2025, CHCS identified a shortage of 148 psychiatric beds in the county. Officials expect the gap to widen to more than 200 by 2030.
“This closure of 330 beds really exacerbates that issue,” LeBlanc Jamison said. “We need to come together and seriously talk about a psychiatric hospital for this community.”
Laurel Ridge operates under parent companies Texas Hospital Holdings, Inc. and Texas Hospital Holdings, LLC. The holding companies are subsidiaries of Psychiatric Solutions Hospitals, and its parent company, Universal Health Services Inc.
Laurel Ridge also serves as an on-site training location for medical, nursing, and therapy students enrolled in programs through multiple universities, including Galen College of Nursing, University of the Incarnate Word, Chamberlain University, the University of Texas at Arlington, Baylor University, Wayland Baptist University, West Carolina University, Texas State University, St. Mary’s University, and Abilene Christian University, according to the lawsuit.
