Oklahoma State University Returns $4.8M After Failed Hospital Project

Oklahoma State University (OSU) will return $4.8 million to the state following the cancellation of a project intended to construct a new mental health facility. The decision, made by OSU’s governing regents on December 5, 2023, is part of a settlement with the Oklahoma State Department of Mental Health and Substance Abuse Services.

The original plan involved building the Donahue Behavioral Health Campus on the OSU-OKC campus, located at the intersection of Interstate 40 and Interstate 44. However, the project was abandoned due to funding challenges. As a result, the state agency has pivoted to acquire a former hospital in southwest Oklahoma City for renovation into a mental health facility.

In December 2023, OSU and the state agency entered into a lease agreement, allowing the agency to utilize property for the planned construction. The agency had initially committed to pay OSU $13 million under the lease, of which $10 million was disbursed. This funding assisted OSU in vacating existing facilities and relocating programs and staff necessary for the project.

OSU President Jim Hess indicated that the university had spent approximately $5.2 million of the funds received. He stated that OSU was not obligated to return the remaining amount but chose to do so in the interest of good governance. “We felt that it was in the interests of the state to return the amount of money that had not been spent,” Hess stated. “When the project wasn’t going to come to fruition, we just wanted to be good partners and citizens and stewards of the public’s money.”

Funding Issues and Leadership Challenges

The Donahue facility was intended to replace the aging Griffin Memorial Hospital in Norman, which has served the community for over a century. However, as the 2025 legislative session progressed, it became evident that funding for the new facility would not materialize. Compounding the challenges, leadership turmoil within the mental health agency contributed to the project’s demise.

Legislators dismissed Commissioner Allie Friesen during the final hours of the session, a decision that sparked controversy, especially as Governor Kevin Stitt, who had appointed Friesen, expressed his disagreement with the action. Following the dismissal, Greg Slavonic, a retired U.S. Navy Rear Admiral, was appointed as the interim director of the agency.

Under Slavonic’s leadership, the agency purchased the former SSM Health hospital on Southwest 59th Street and Pennsylvania Avenue for $18.5 million and plans to invest an additional $41.5 million for renovations. This total of $60 million will be funded through the American Rescue Plan Act, which was originally allocated for the Donahue facility at OSU-OKC.

The agency’s communications office did not respond immediately to inquiries regarding the OSU regents’ decision to return the funds. Hess clarified that when the agency initially paid OSU the $10 million, they had secured funding from private sources, a fact that OSU was not aware of at the time. He suggested that the purpose of returning the $4.8 million is to facilitate the return of funds to the foundations that contributed financially to the agency.

This decision marks a significant shift in the landscape of mental health services in Oklahoma, reflecting both the complexities of funding and the importance of collaborative efforts between state agencies and educational institutions. OSU’s proactive approach to returning the unspent funds demonstrates a commitment to transparency and responsible stewardship of public resources.