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Portland Mayor Ted Wheeler (left) looks around a patient room during a tour at the grand opening of the Unity Center for Behavioral Health in Portland, January 5, 2017. The state on Friday rejected an application for a competing psychiatric hospital in Wilsonville. (OHSU/Kristyna Wentz-Graff)

(Kristyna Wentz-Graff)

The Oregon Health Authority has rejected an application from a Pennsylvania healthcare company to build a 100-bed psychiatric hospital in Wilsonville.

State officials said Universal Health Services failed to prove there was a need for the facility or that its planned $35 million facility offered the most efficient means to meet local requirements. It marks just the second time in 27 years that state officials have denied a request to build a new hospital.

The company managed to satisfy just one of eight requirements -- its own financial wherewithal -- necessary to gain approval of its certificate of need application, the state said.

Universal said it was disappointed and vowed to appeal the state's denial.

"We have worked for more than a year to demonstrate our ongoing commitment to the community, and address any concerns," spokesman David Carter said. "What's most perplexing about today's decision is that it ignores the well documented need for behavioral health services in Clackamas, Multnomah, and Washington counties and surrounding areas."

The Oregon Health Authority approves most applications with little fanfare. But Universal's Wilsonville plan drew opposition from mental health advocates, organized labor and competing healthcare companies.

Four large local players -- Legacy Health, Adventist Health, Oregon Health Sciences University and Kaiser Permanente Northwest -- just opened the Unity Center, a new psychiatric hospital, in Northeast Portland. They argued that with the addition of Unity's 82 beds and 24-hour-a-day psychiatric emergency room, the region didn't need another in-patient psychiatric hospital.

There's little disagreement that Oregon desperately needs additional resources for the mentally ill. Patient advocates and the federal government have for years pushed Oregon to de-emphasize institutional treatment centers in favor of small, community-based facilities.

Critics also raised questions about the quality of care at some Universal institutions and a federal criminal investigation into possible billing fraud that has dragged on for four years.

The city of Wilsonville enthusiastically supported Universal's bid. The hospital would have employed 250.

-- Jeff Manning

503-294-7606, jmanning@oregonian.com