Why Behavioral Health Institutions Are Closing Despite Skyrocketing Demand: Lessons in Leadership and Workforce Strategy from Elwyn’s CMO

Introduction: The Paradox of Behavioral Health Demand and Organizational Survival

The U.S. is facing a silent crisis: even as the need for psychiatric and behavioral health services reaches historic highs, many behavioral health institutions are closing their doors. In cities like Philadelphia, this contradiction is personal for healthcare leaders—and the stakes are existential for patients, providers, and the healthcare system at large.

Why does this gap persist, and what can be done about it?

In this episode of The Strategy of Health podcast, we sit down with Kurt Miceli, MD, MBA, SVP Quality Improvement and Chief Medical Officer at Elwyn, one of the nation’s oldest human services organizations, to unravel the complex economics, leadership choices, and workforce strategies shaping the future of behavioral health. Dr. Miceli draws on a rare blend of clinical, executive, and consulting experience—including his time as a McKinsey summer associate and a Villanova healthcare economics instructor—to give listeners a candid, actionable look inside the system. If you’re an executive, advanced student, or healthcare leader, the lessons here are directly relevant to today’s labor market, payer challenges, and organizational resilience.

What Drove Dr. Kurt Miceli into Psychiatry—and What Keeps Him in Leadership?

Dr. Miceli’s path to behavioral health was personal, circuitous, and shaped by formative moments in medical school. He reflects, “My parents envisioned that I would be an ear, nose, and throat doctor and I would take over my uncle’s practice… but it was that third-year medical school rotation at the Eastern Pennsylvania Psychiatric Institute… just being on the unit, seeing adolescent girls really receiving psychotropic medication to help make them better, it really struck me in a very powerful way.”

From those roots, Miceli became convinced that psychiatry—and especially the interface of behavioral and medical care—was where he could make the greatest difference. But a second powerful insight shaped his trajectory: institutions can vanish overnight if not managed well.

“The other thing that was also piquing my interest… was just the fact that, wow, if you really don’t run a hospital well, hospitals can go out of business. That was something that struck me very powerfully, and it made me wonder, is it possible for me to help continue the role of healthcare as a physician leader—as a physician executive—to offer that expertise?”

Dr. Miceli chose a rare combined Medicine and Psychiatry residency, later adding an MBA from UVA’s Darden School. This blend, he says, is increasingly common for physicians who see healthcare leadership not as an escape from patient care, but as a means to drive systemic improvement. “I like to always wear that clinical hat to remind myself as to why we do what we do in terms of caring for patients and really aiming to make their lives better.”

Why Are Behavioral Health Institutions Closing Amid Surging Demand?

If demand for psychiatry and behavioral health is so high, why are so many organizations struggling or shutting down? The answer, says Dr. Miceli, is that U.S. behavioral health is not a true free market; it’s a market shaped by CMS price setting, payer mix, and a fundamental mismatch between revenue and costs.

He explains:
“You would certainly think that in a free market system… we’ve got a system that is very much based and indexed on the prices that CMS has believed to be those that are set. The rates for the cognitive sciences really aren’t enough, per se. Proceduralists tend to do better… but on the behavioral health side, we also have significant costs just in the fixed costs, and really those are oftentimes the labor units. Even at an organization like Elwyn, labor is 70% of our expenses. It is the driving force.”

Key reasons for closures and financial strain:

• CMS/Medicaid reimbursement rates lag market reality. Many private payers follow CMS’s lead, multiplying a base rate set by Congress.

• Behavioral health is labor-intensive. Fixed costs are high, and labor is 70% of expenses at Elwyn.

• Medicaid-heavy populations require more in-person care. Telehealth can’t fully substitute, so costs remain high.

• The labor market for clinicians is ultra-competitive. Telehealth has increased clinician earning power, driving up salaries—but institutions serving low-margin populations can’t always compete.

• COVID-19’s temporary funding fixes are gone. Federal dollars for technology and emergency support have dried up, but expenses remain elevated.

As Miceli summarizes, “When you start getting into the weeds… the revenue versus the expenses that one has, the equation turns out to be a little bit different for the practice.”

How Has Telehealth Changed Access and Economics in Behavioral Health?

Telehealth has been both a lifeline and a challenge for organizations like Elwyn. During COVID, relaxed regulations and federal funds allowed for rapid adoption of telepsychiatry, dramatically lowering no-show rates and improving access.

“Telehealth has been great in allowing and improving access to care… you can just turn your computer on or get somebody on the phone. That has definitely helped with our organization. Our no-show rates are significantly improved—we were an organization that would have almost 50% no-show, which certainly is a death knell for any practice.”

But telehealth is not a panacea, especially for Medicaid populations. Many require more intensive in-person appointments, and regulatory allowances for phone-only visits are likely temporary. As Miceli notes:

• Not all clients have access to technology or familiarity with it.

• Some payers and states restrict telehealth reimbursement, especially for Medicaid.

• Telephone visits fill a gap, but video and in-person remain essential for quality care.

Miceli is candid: “We are in a much better situation than we were before COVID… in a very weird way, COVID has forced us to look differently… but there are limiting factors, there are challenges.” Ultimately, telehealth must be seen as a supplement—not a substitute—for systemwide investment and access.

What Can Non-Clinical Healthcare Leaders Do to Improve Patient and Member Experience?

Administrators without clinical backgrounds often struggle to truly enable great patient experiences. Dr. Miceli’s advice: get out from behind your desk.

“One of the things I’ve seen administrators do who aren’t clinicians is literally walk the beat. Go to the homes, go to the offices, see the encounters… see the waiting room… meet clients, meet clinicians.”

Other effective strategies for non-clinician administrators:

1. Shadow clinicians regularly. This breaks down silos and reveals real pain points.

2. Foster open communication and feedback loops. Create safe spaces for clinicians to share concerns and ideas.

3. Invest in relationship building. Both with staff and patients.

4. Remember everyone is a patient at some point. Use that empathy to bridge the divide between the C-suite and the front line.

As Miceli puts it, “It’s all about the relationship that you have with people and nurturing them, developing them so you can have honest conversations and give honest feedback to the clinicians. Not that it’s a yes to everything—but treating each other as we want to have our clients treated will set a great tone and build a great relationship.”

Why Is Workforce Turnover So High—and How Is Elwyn Addressing It?

The U.S. human services sector faces 40% or higher annual turnover rates, with huge downstream costs for organizations and clients. As Miceli observes, “That has a huge cost associated with it—millions of dollars—because you onboard someone, that costs money, and then they leave in six months.”

The turnover crisis stems from several root causes:

• Low wages relative to retail and non-healthcare jobs. Entry-level direct support professionals often earn $15–$20/hour, competing with Target and big-box retailers.

• Misaligned expectations. Many new hires don’t fully grasp the realities of behavioral health work.

• Insufficient training and support. Without strong onboarding, mentorship, and supervisory skills, burnout and attrition rise.

Elwyn’s multi-pronged strategy includes:

• Realistic job previews. “Let’s have them walk through the unit on any given day—show and tell so folks can see what they do. It’s one of the pieces of information that we’ve got in many exit interviews: ‘This wasn’t the job I signed up for.’”

• Targeted management training. Building supervisors’ capacity to coach, mentor, and support is critical.

• Educational and career pathways. Elwyn offers $5,000+ in educational stipends to support staff growth, and strong university partnerships.

• Retention through relationship. “When you’re working with folks with intellectual and developmental disabilities, it is even more about relationships.”

Miceli emphasizes that these investments are not just soft benefits—they are cost-saving necessities. “Those investments end up being cheap if you’re able to turn down the turnover needle. I’d much rather have it spent in investing in people, keeping them there. And again, it’s all about relationships.”

What’s Next for Behavioral Health Workforce and Leadership in the U.S.?

Where do we go from here? The answer is nuanced but urgent. The workforce crisis cannot be solved solely by recruiting new clinicians or throwing more technology at access problems. Long-term retention, investment in management, and clear career ladders must be part of every healthcare leader’s playbook.

Dr. Miceli points to global examples: “In India, the turnover rate throughout the country is very high—40% to 60%. So they do long-term strategies of implementing education, training, benefits… a lot of the competitive companies, and that echoes a lot of what you’re saying, that the environment is so competitive, and when somebody leaves, we’re kind of just throwing the money away.”

It’s about seeing beyond spreadsheets to the real cost—and opportunity—of investing in people and culture.

“When you have that high turnover, you’re going to lose institutional knowledge, you’re going to lose many of the things that you do… investing in those folks that you have—hire well, train well, mentor well, retain well—it goes a long way. And again, I don’t think it needs a rocket scientist to produce that, but at least we need to be clear on the map so that we can follow it.”

Takeaway: The ROI of Relationship-Centered Leadership

The story of behavioral health workforce challenges is a story about the real value of relationships, empathy, and leadership in a world of spreadsheets and bottom lines. Dr. Kurt Miceli’s experience at Elwyn shows that sustainable solutions come not from chasing the latest funding stream or technology, but from investing deeply in your people—before and after they walk through the door.

For U.S. healthcare executives and leaders, the next era belongs to those who treat workforce and culture as their most strategic assets. As Miceli reminds us, “We want to support them in that growth. We want to help make this a home for, ideally, the rest of their career. Again, that’s not for everybody, but we need to think about those pathways very deliberately and consciously—because we also need the next generation of clinicians, and of leaders, and of managers.”

Actionable insight: If you lead a healthcare organization, audit your recruiting, onboarding, and management training today. Set retention as a strategic goal. Invest in clear career paths and real-time feedback. The ROI is not just financial—it’s the future of care.