The future of an acute psychiatric hospital planned for the North County is in question after Palomar Health lost a state grant for the project.
The California Department of Health Care Services (DHCS) is pulling $50 million for the Palomar Health Behavioral Health Institute project. The funding comes from Proposition 1, which sets money aside for behavioral health treatment facilities.
Palomar Health was awarded the grant in May 2025 for the "launch ready" project, but the grant has a matching fund requirement.
The grant was rescinded on Aug. 18 because "Palomar did not meet the match documentation requirements, which Palomar identified would be cash," DHCS said in a statement. "As a result, DHCS informed Palomar that its conditional award was rescinded for the Palomar Health Behavioral Health Institute project. The decision is final and not subject to appeal."
In September 2024, with local officials present, Palomar Health broke ground for the 120-bed acute psychiatric hospital in Escondido. At the time, Palomar Health CEO Diane Hansen said it would make a lasting impact on North County.
“The Palomar Health Behavioral Health Institute stands as a promise to our community that mental health care will be accessible, compassionate and innovative,” she said.
On Thursday, there were barricades, caution tape and construction notices at the site at the south end of the Palomar Medical Center Escondido parking lot, but no other sign of work on the project.
When asked what the rescission means for the future of the project, the publicist for Palomar Health said the hospital district has “no comment at this time.”
Palomar Health board member John Clark said he doesn’t know if the project is still going forward.
“It's disappointing, but Palomar Health has always been on the forefront of trying to encourage and support mental health, and mental health issues in the area," he said. "And we're hopefully going to continue to do that.”
