Objective Psychiatric hospitalizations and emergency department (ED) visits are costly, stigmatizing, and often ineffective. Given the immune and kynurenine activation in bipolar disorder (BD) and schizophrenia, as well as the immune-modulatory effects of statins, we aimed to compare the relative risk (RRs) of psychiatric hospitalizations and ED visits between individuals prescribed lipophilic vs. hydrophilic statins vs. no statins. We hypothesized (a) reduced rates of hospitalization and ER utilization with statins versus no statins and (b) differences in outcomes between statins, as lipophilia increases the capability to penetrate the blood–brain barrier with potentially beneficial neuroimmune, antioxidant, neuroprotective, neurotrophic, and endothelial stabilizing effects, and, in contrast, potentially detrimental decreases in brain cholesterol concentrations leading to serotoninergic dysfunction, changes in membrane lipid composition, thus affecting ion channels and receptors. Methods We used VA service utilization data from October 1, 2010 to September 30, 2015. The RRs for psychiatric hospitalization and ED visits, were estimated using robust Poisson regression analyses. The number of individuals analyzed was 683,129. Results Individuals with schizophrenia and BD who received prescriptions for either lipophilic or hydrophilic statins had a lower RR of psychiatric hospitalization or ED visits relative to nonstatin controls. Hydrophilic statins were significantly associated with lower RRs of psychiatric hospitalization but not of ED visits, compared to lipophilic statins. Conclusion The reduction in psychiatric hospitalizations in statin users (vs. nonusers) should be interpreted cautiously, as it carries a high risk of confounding by indication. While the lower RR of psychiatric hospitalizations in hydrophilic statins relative to the lipophilic statins is relatively bias free, the finding bears replication in a specifically designed study. If replicated, important clinical implications for personalizing statin treatment in patients with mental illness, investigating add-on statins for improved therapeutic control, and mechanistic exploration for identifying new treatment targets are natural next steps.