Controller's work group urges targeted expansion of high-acuity behavioral-health beds; city lists funding and projects underway

The Controller’s Office and a city work group on residential care and treatment recommended targeted expansion of high-acuity behavioral-health beds to better serve San Franciscans with the most complex mental-health and substance-use needs, and city health officials described capital awards, acquisitions and operational steps intended to add treatment and step-down capacity over the coming years.

Laura Marshall of the Controller’s Office summarized the work group’s January report, which concluded there is a measurable shortage of locked subacute treatment (often called “MERCs” or locked subacute) and specialized adult-residential (ARF/RCFE) capacity for clients who have combined medical, psychiatric and behavioral-complex needs. The report recommended a targeted addition of roughly 55–95 locked subacute beds and 20–48 high-complexity ARF/RCFE beds for harder-to-place clients, noting that those beds would likely require higher patch rates and would be largely non-Medi-Cal reimbursable operating costs borne by the local government.

Marshall and work group participants warned that even competitive county rates have not fully solved a market problem: operators sometimes deny placements for reasons beyond the city’s rate structure, leaving some clients medically or behaviorally complex and effectively unplaceable in the existing market. The work group urged state policy changes and better regional coordination, noting that San Francisco alone cannot meet statewide need.

Department of Public Health officials outlined a planning and implementation package. Director Daniel Tsai and Dr. Monica Kunins (presenting with DPH) told the committee the department plans to open about 190 treatment-and-recovery beds and roughly 100 step-down and ongoing recovery beds between 2025 and 2028, with a mix of new contracts, repurposed city buildings and state capital funding. Tsai said DPH estimates a local shortage of roughly 100–140 locked subacute beds overall and said the department had purchased or leased 48 out-of-county beds while pursuing in-county capacity.

DPH described specific projects: the department received about $28 million in one Prop 1 capital award for a Seventh Street dual-diagnosis site, and $21 million for locked subacute expansion at the Zuckerberg San Francisco General Hospital behavioral-health center (BHC). DPH said it has been awarded approximately $88 million in state capital for behavioral-health projects since 2022 under the Behavioral Health Infrastructure Program.

Officials said DPH intends to repurpose the first and second floors of the BHC at ZSFG to add more than 90 locked subacute beds in county, and that two purchased Laguna Street buildings (601 and 624 Laguna) would house assisted-living residents and other residential-care placements. DPH also described a forthcoming Marina Inn project to add transitional recovery beds and additional housing-based recovery services.

Marshall noted the work group’s modeling and operational analysis found large budget implications: depending on the configuration and whether higher patch rates are required for complex clients, the additional operating cost for the recommended expansion could range into the tens of millions of dollars annually; the work group estimated a potential general-fund cost in the range of $12 million to $24 million for the proposed ARF/RCFE additions, and DPH staff told the committee adding 100 locked subacute beds could cost roughly $20 million a year (with estimates up to about $28 million for larger scenarios).

The Controller’s Office and DPH emphasized operational barriers beyond financing: facility procurement lead times, workforce shortages for specialized staff, regulatory licensing complexity for locked subacute settings and the need for the state to help with allocation of state-hospital beds and broader coordination.

Public commenters and service providers at the hearing urged urgency. Steve Fields, executive director of the Progress Foundation, said the city needs to pair top-down expansion of beds with stronger voluntary and early-intervention services and asked for more engagement with frontline providers on practical operational questions. Other commenters, including Carolyn Kennedy and community advocates, called for a faster rollout of locked subacute beds and for prioritizing the hardest-to-place clients.

What the city is doing now: DPH said it will continue to pursue Prop 1 and other state capital, use city-owned property where practicable, convert identified buildings and deploy contract waivers to speed openings. The department said bed-tracking and improved data infrastructure (including an Epic-based health record transition) will help refine demand estimates and optimize placement flows over time.

Supervisors and presenters agreed on two points: San Francisco needs more capacity at higher-acuity levels, and the problem cannot be solved entirely with local funds and procurement alone — state-level coordination, regulatory adjustments and fiscal support will be necessary to meet the full need.