The Shifting Landscape of Behavioral Health
The growth-at-all-costs days are over in behavioral health. Buyers now seek operators with density, sustainable reimbursement models, and a deep continuum of care, according to industry insiders discussed at Behavioral Health Business’ INVEST conference last week.
This shift is a response to macroeconomic pressures and a change from previous conference narratives focusing on aggressive expansion. Buyers now demand tangible results and robust business models from providers.
This trend is driven by payers aiming to control behavioral health spending while utilization continues to rise among their members. Reimbursement trends are thus closely tied to mergers and acquisitions (M&A), with investors expecting portfolio companies to have in-network agreements with payers. Investors also prioritize providers demonstrating quality outcomes data.
In this BHB+ Update, we explore:
- The preference for market density over geographic scope
- The central role of reimbursement and outcomes data in strategic decision-making
- The evolution of care models towards integrated, individualized continuums
Market Density: A Top Priority
Gone are the days of expanding across multiple states as a guaranteed success. Now, investors encourage providers to build market density and quality while carefully entering new markets.
"I think you have to be really careful about when you decide to go multi-state... To receive a high valuation, you’re going to have to be multi-state and have replicability," said Brian Wheelan, CEO of Transformations Care Network, at INVEST.
Focusing on depth within a market allows providers to establish a strong reputation and offer a comprehensive continuum of care rather than a single service line across multiple states.
"We don’t just put dots on the map," said Justin Adams, COO of Bradford Health Services. "We try to build density... so we can build out a full continuum of care."
Reimbursement and Outcomes Data: Central to Strategy
As payers face rising behavioral health costs, they seek ways to differentiate providers. While access to members was previously a primary focus, payers are now tightening networks and demanding quality metrics.
"I’ve gotten rate increases with every company I work with... because we are actively trying to build data infrastructure to show quality," noted Doug Shinkle, a partner at Lorient Capital.
Payers are looking for justifications for higher rates and preferred status, emphasizing the importance of quality care in a challenging market.