Behavioral Health Facility Feasibility Study

From $7,900, fixed fee, quoted before the engagement starts. 9 to 16 business days, rush from 5 business days. Prepared to USDA 7 CFR Part 5001 and SBA SOP 50 10 8.1, with a contractual acceptance commitment written into the engagement letter. First response within 12 business hours.

MMCG Invest prepares the independent feasibility study for a new or expanding behavioral health facility, from a 16-bed residential program to a licensed psychiatric unit. Demand for treatment is at a record and residential capacity is tight, but the sector's swing payer is Medicaid, and Medicaid financing changes from January 2027. The study measures bed need in the county, verifies the competing programs, models the payer mix under the new rules and tests debt service coverage against a Medicaid census that falls rather than rises.

The 2024 national survey counts 23,948 behavioral health facilities, of which 17,829 provide substance use treatment, 15,421 provide mental health treatment and 9,302 provide both. Clients in substance use treatment reached 1,660,240 in 2024, the highest on record. Residential substance use programs operate about 88,383 designated beds in 2,721 facilities, an average of 32 beds, at 89.2% utilization, and hospital inpatient substance use units run above full occupancy once non-designated beds are counted. National supply averages about 34 substance use treatment beds and 29 mental health beds per 100,000 residents, with wide variation by state and far wider variation by county. A feasibility study tests the county's beds per 100,000 against the state average and against payer-specific demand, because a market can be short of beds in total and still have no Medicaid-rate capacity to fill them.

Federal Medicaid does not pay for adults aged 21 to 64 in an institution for mental diseases, meaning a facility with more than 16 beds that primarily treats mental illness or substance use disorder. That rule shapes facility size: programs that depend on Medicaid in states without a waiver cap at 16 beds, while facilities in waiver states average about 32. As of April 2026, 38 states including the District of Columbia hold Section 1115 waivers that allow federally matched Medicaid payment for short residential substance use stays, typically targeting a statewide average length of stay of 30 days or less, and South Dakota and Tennessee cover such stays under a state plan option. Waivers for serious mental illness are fewer and the published counts conflict, so MMCG confirms the project's state waiver status directly before modeling Medicaid revenue.

Medicaid covers roughly a quarter of adults with a substance use disorder and nearly half of adults with opioid use disorder, and the 2025 budget reconciliation law changes how that coverage works. Expansion adults aged 19 to 64 must meet an 80-hour-a-month work, school or service requirement from January 1, 2027, with Nebraska already enforcing it from May 2026; the interim final rule narrows the medical frailty and substance use exemptions and requires reverification at least every 12 months. Expansion adults move to six-month redeterminations from the same date, and retroactive coverage falls from three months to one month for expansion adults and two months for others. Provider taxes are frozen and the expansion-state safe harbor steps down from 6% to 3.5% between 2028 and 2032, and state-directed payments are capped at 100% of Medicare rates in expansion states and 110% elsewhere. The Congressional Budget Office estimates 10 million more uninsured by 2034, about 5.3 million of them from the work requirement alone.

For a treatment facility the mechanism is specific. Patients outside active treatment or in stable recovery can lose coverage between episodes, which raises readmission exposure and self-pay write-offs; six-month renewals create mid-episode coverage gaps; shorter retroactive coverage limits what can be billed for patients who arrive uninsured; and the provider tax and directed-payment limits shrink the state funds behind rate add-ons for psychiatric units. MMCG stress-tests Medicaid census down 15% to 25% in expansion states from 2027, models a slower ramp for units that depend on directed payments and favors projects with a commercial, TRICARE or Medicare anchor in the base case.

For-profit operators in communities of 50,000 residents or fewer can use USDA Business and Industry guarantees of up to $25 million, 85% guaranteed under $5 million and 80% from $5 million to $25 million in FY2026, with terms up to 40 years and an independent feasibility study required on guaranteed loans over $1 million to a new business. Nonprofit and public operators in communities of 20,000 or fewer can use USDA Community Facilities direct and guaranteed loans, where a new program is a new activity and a guaranteed loan over $1 million requires the Appendix A study. A critical access hospital adding behavioral health beds falls under the same rule.

Under SBA, a licensed residential treatment facility that delivers clinical services is an eligible operating business, while unlicensed sober-living or recovery housing that sells beds without medical services risks treatment as an ineligible passive business. Nonprofit and government-owned operators are ineligible. A de novo licensed residential facility is a startup in a limited purpose building, so under 13 CFR 120.910 the SBA 504 borrower contribution is 20%, and 15% where only one condition applies; 7(a) startups carry a minimum 10% injection and 1.15 projected debt service coverage. The 7(a) cap of $5 million and the $5 million 504 debenture fit outpatient programs and residential facilities of 16 to 40 beds, and larger psychiatric hospitals finance conventionally or through USDA.

Psychiatric beds are the behavioral category most often released from certificate of need review: North Carolina removed them in 2023, Oklahoma repealed psychiatric and chemical dependency review in 2024, Washington exempts psychiatric beds through June 2028 and Georgia exempts programs serving Medicaid and uninsured patients. Review persists in much of the Northeast and Southeast, Mississippi holds a moratorium on Medicaid child and adolescent psychiatric beds, West Virginia holds a moratorium on opioid treatment programs and Louisiana runs facility need review for several community programs. Beyond certificate of need, the schedule turns on state behavioral health licensure, opioid treatment program certification where applicable, Medicaid enrollment and accreditation, and the study carries each as a dated milestone against the opening date and the lease-up curve.

A full model study is published for this page: a 32-bed licensed residential substance use disorder treatment facility in a rural Medicaid expansion state, financed under a USDA Business and Industry guarantee, with Medicaid census stressed down 20% from 2027. USDA B&I Feasibility Study Case Study: A 32-Bed Residential Substance Use Disorder Facility in Adena, Ohio, Conditionally Feasible

Send the site, the level of care and bed count, the licensure sought, the payers the program will accept, the operator's background and the loan program. A senior analyst responds within 12 business hours with a fixed-fee proposal and a delivery date.