Aurora Mental Health cutting 111 jobs, citing Medicaid cuts. State officials push back

AURORA | Aurora’s mental healthcare provider announced this week it will lay off more than 100 staff members because of Medicaid funding reductions at the federal and state levels. State officials, however, dispute Colorado has contributed to the provider’s financial struggles.

Aurora Mental Health and Recovery officials said the program is reducing its staff by 111 employees, mostly administrative and support positions, as of June 30.

Only four roles providing direct client care will be eliminated, officials said. Additionally, the facility plans to reduce some of its services.

CEO Kelly Phillips-Henry said in a statement changes to Medicaid at the state and federal levels represent a $13 million hit to the organization’s budget, which it can’t afford because it operates on a break-even payment model.

Aurora Mental Health and Recovery “is taking this action with a heavy heart,” Phillips-Henry said.

Aurora Mental Health will also close programs that don’t have sustainable funding, including adult education, victim assistance, a youth leadership academy and Aurora Sustains, a mental health screening initiative partnered with the municipal court system. 

Behavioral health residential services for Mrachek House and Thomas Houses will end as well, though residents will continue living at Mrachek, which will be managed by the U.S. Department of Housing and Urban Development. 

Phillips-Henry said the organization is “committed to ensuring that no client experiences a gap in care as a result of these closures.”

In an effort to reduce the number of layoffs, the organization also instituted other cost saving measures, including mandatory furloughs for leadership, reducing paid holidays and eliminating travel. Aurora Mental Health was able to cut expenses by $1.4 million, which translates to saving 22 positions.

Phillips-Henry said the organization is performing ahead of budget for the year and has cash available but is limited by its payment model, which is directed by the Colorado Department of Health Care Policy and Financing. The model pays providers at cost with no operating margin.

“Colorado’s safety net behavioral health system rests on a payment model that threatens our ability to serve the people who need us most. That must change,” Phillips-Henry said. “Safety net providers need stability in order to continue serving our communities, especially the most vulnerable among us.”

State officials strongly dispute Aurora Mental Health’s claims that budget cuts or the state’s payment program contributed to financial woes.

“The assertion that these reductions are due to state and federal budget cuts simply isn’t true,” Eric Maruyama, a spokesperson for Gov. Jared Polis, said. “Providers like Aurora Mental Health are paid a rate that is intended to cover their costs, in advance, with a reconciliation period. Ultimately, they overestimated their costs, meaning they were overpaid, and the state had to recover that overpayment, which is why they are facing this financial situation.”

The governor’s office also provided an April 14 letter sent to Aurora Mental Health from the Department of Health Care Policy and Financing. 

The letter defended the state’s payment model as a way “to preserve the broadest possible array of services for vulnerable Coloradans, provide stable funding that can be tracked month over month, and remain in compliance with federal regulations and approvals.” It said the department doesn’t have the resources to support additional provider payments.

The department also said it is working on creating new ways to support providers and offered to ensure Aurora Mental Health could take advantage of “all of the resources we have set up to support and educate providers, and to understand what additional technical assistance would be helpful beyond what we have available.”

Aurora Mental Health isn’t the only provider struggling with the state’s payment system, according to the Colorado Behavioral Health Council, a nonprofit representing healthcare providers. The council has formally raised concerns about the payment model with the state legislature’s Joint Budget Committee and the state’s Department of Health Care Policy and Financing.

In a statement, Colorado Behavioral Health Council CEO Kara Johnson-Hufford said the state’s payment model has not kept pace with the obligations of healthcare providers. 

“The fact that (Aurora Mental Health and Recovery) have reached this point is not a reflection of their performance,” Johnson-Hufford said. “It reflects a payment model that, as currently designed, is not fully aligned with the demands placed on comprehensive safety net providers.”

A March 2026 survey of the council’s member organizations found that 77% are operating at break-even or at a loss, while 62% have reduced services or frozen hiring.

Colorado’s Medicaid Interim Committee plans to discuss the state’s payment model this summer and Johnson-Hufford said the council hopes to help work toward “a payment architecture that can more effectively support and sustain the system Colorado has built.”

Aurora Mental Health’s Phillips-Henry said the cuts are devastating, adding the organization will continue to look for sustainable funding to bring the services back in the future.

The impacted employees will receive a 60-day notice period, severance and outplacement services. Aurora Mental Health will allow them to apply for remaining vacant positions in the next fiscal year.

The layoffs and cuts come after Aurora Mental Health and Recovery opened a new walk-in access facility, Potomac Pavilion, earlier this year. The clinic offers same-day, non-emergency mental health services during weekday business hours and provides 24-hour crisis services, including a crisis walk-in clinic, a crisis stabilization unit and a detox facility.

The $38 million project is a collaboration among Aurora, Adams and Arapahoe counties, the state and federal funding sources. The building includes an ambulance bay to allow law enforcement and emergency medical personnel to bring people experiencing mental health or substance use crises directly to specialized care.

If you or someone you know is having a mental health crisis or contemplating suicide, call or text 988 for help or go to 988Colorado.com.