A new era for behavioral health
The demand for care addressing ailments of the mind is growing
INSIGHT ARTICLE |
The business of providing care to people with behavioral health issues is looking more and more attractive as the stigma surrounding these conditions is easing and the impact of health care legislation continues to expand the market for such care.
Behavioral health, a broad umbrella term covering many conditions including substance abuse and addiction, eating disorders, attention deficit disorder, attention deficit hyperactivity disorder, intellectual and developmental disabilities, autism spectrum disorder and other mental health issues, has largely failed to develop beyond a fragmented market of small and medium-sized companies, held back by an inability to scale and a lagging adoption of technology. Private equity investors and health care entrepreneurs see an opportunity to offer these important services via much larger, more efficient and tech-enabled platforms.
With the passing of the Affordable Care Act, coverage was greatly expanded for behavioral health treatments. With the consolidation of insurance and health care providers and the growing need for behavioral health services, these changes are re-shaping the market.
Of course, if building a large, scalable behavioral health business were easy, the market would already have many of them. There are several challenges that stand in the way of today’s diverse set of care providers and the vision of a next-level health care provider. Foremost among these challenges is the scarcity of talent at all levels, according to Matt Wolf, a director and health care senior analyst with RSM US LLP. “There aren't a lot of executives, managers or administrators who really understand the behavioral health landscape well enough to scale it from that one single psychiatrist into a team of hundreds that are working across multiple states,” Wolf says.
Adding to the challenge of scaling is the complexity of the regulatory framework from state to state. “There are so many differences between states in terms of how substance abuse treatment is reimbursed, for example,” says Wolf. “What might work in Massachusetts might not in Rhode Island.”
Successfully scaling a business requires, among other things, the right leaders with the right experience, and those types of professionals are in very short supply. There are many executives who have had success scaling large health care providers, but are not yet up to speed on the nuances of the various subspecialties within behavioral health. Wolf says that among his clients are those that have experience in traditional hospital environments and assisted living, who are attempting to retrain health care executives from other sectors into behavioral health experts.
Not only is talent scarce at the managerial level, but the caregivers themselves are hard to find, a labor shortage that the entire health care market suffers from. A slight advantage that behavioral health care providers have as businesses is the diverse mix of providers among their ranks. In addition to doctors and specialist nurses, there are social workers and others who, while still in short supply, do not require years of schooling to begin working. Wolf says he has seen several clients partner with or acquire nursing schools and other training programs in order to gain an edge in provider recruitment.
Another attribute of the behavioral health business that has investors intrigued is the fact that some of the care and counseling is now taking place over the phone, a model often called telehealth. According to Arvind Rao, a director with RSM US LLP, more and more of his clients are embracing virtual care services and making long-term investments in the technology needed to support this new form of care. “There is movement in implementing more advanced and modern technology within most of these providers.” Rao notes that cross-border regulatory issues remain thorny issues in offering these virtual services.
“People will end up getting comfortable working with health care providers over the phone or via video,” Rao says. “These providers know that the move to telehealth could have a huge impact on future costs.”
Wolf adds there is excitement around behavioral telehealth from provider and patient alike. “Digital health holds the promise of scaling care and making it virtual so that it can be accessed by more people instantly,” he says. “This is what patients want. They want to be treated where they are, at a time that works for them.”
Behavioral health providers increasingly are using other forms of technology to their advantage. According to Rao, “With the move toward value-based care reimbursement, providers are more likely to use data analytics to better chart trends in their patient populations and measure outcomes. They are putting together data warehouses, and having to build better reports so that they receive funding and they don't leave money on the table.” Rao says he has also seen rival providers pool their data for mutual benefit.