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Last month, Ashburn, the country's oldest private psychiatric hospital, announced it had to drop 9.7 full-time equivalent (FTE) staff to cope with a $900,000 funding shortfall.
It has also mothballed a hostel for self-sufficient patients - Alexander House - to save heating costs during winter.
Mr Smith said the staff cuts were managed mostly through voluntary redundancies or staff agreeing to fewer hours.
On top of two involuntary redundancies, one worker had been unwilling to take a 0.5FTE role, and was "snapped up by Cadbury's".
Mr Smith's own position reduces from full-time to 0.5FTE.
As well as that, kitchen staff reduce 1FTE, psychiatric staff 0.7FTE, psychotherapy 1FTE, office staff 1FTE and nurses 5.5FTE.
"It has been distressing for staff to see long-time work colleagues going, and to see Alexander House shut."
Ashburn, established in 1882, had never had to cut staff before, he said.
Staff were already being farewelled, almost on a daily basis.
Ashburn had to move quickly once it realised the seriousness of its financial position.
The patients were "coping brilliantly" with the changes, which included combining two inpatient wards in order to temporarily close Alexander House.
Ashburn's "therapeutic community" meant patients were included in the change process, he said.
During the past five years, ACC funding for sexual-abuse inpatients dropped from $2 million to $900,000 in 2009-10, with referrals now non-existent.
The clinic has also lost a $500,000 five-bed eating-disorder contract with the Ministry of Health, although earlier this month it picked up a more modest outreach eating-disorder contract from the Southern District Health Board.
Ashburn has also been hit by the recession, with private patients opting for shorter stays.