In Brief: Expect another busy year in the behavioral health space.
The topic of mental and behavioral health (MBH) care entered the national conversation in dramatic fashion during the pandemic, as the circumstances around COVID-19 led to unprecedented demand for services, exposed long-standing access issues, and exacerbated workforce shortages. But the past several years have also demonstrated the effectiveness of telemedicine in MBH, diminished the stigma around MBH care, and seen well-funded nontraditional players enter the field.
As part of our series on Mental Health Awareness Month, here are five trends we expect to see across the next year as the provision of MBH services continues to rapidly evolve.
1. Private Equity (PE) Firms Will Continue Focused Growth and Consolidation:
PE groups continue to drive consolidation and growth in the MBH space. Overall investment activity is slower in early 2023 than in previous years, but continued consolidations and de novo growth under existing platforms are expected to increase throughout the remainder of the year.
We see three key MBH subsectors as ripe for PE investment in 2023:
- Autism: Closed deals in the autism space dropped 10% in 2022, in part due to staffing concerns and inflation; however, such effects may lead to increased independent practice sales to PE-backed platforms in 2023 as these practices seek financial options to help keep their doors open.
- Digital mental health (especially with a pediatric/adolescent focus): In 2021, PE groups invested $3.1 billion into mental health ventures in the digital space—representing one-third of all digital health funding that year. Given the dependence on hybrid care models developed as a result of COVID-19, digital health investment is expected to continue.
- SUD and opioid treatment programs (OTPs): SUD/OTP programs are being viewed by payers as a potential front-runner for enhanced value-based care models—making them a prime target for PE firms due to the potential for shared risk and enhanced returns.
2. Managed Care Negotiations Will Require Differentiated Value Offerings:
Over the last few years, payers have insourced management of their MBH networks in an effort to monitor utilization and create opportunities to comanage MBH and physical healthcare needs for their members. Such payers include Anthem, through its recent acquisition of Beacon Health Options, as well as numerous local Blues plans insourcing from Magellan (e.g., Independence Blue Cross [IBX] in Pennsylvania, AmeriHealth NJ [AHNJ], BCBSTX). Building on their insourcing, payers have begun standardizing historically deflated MBH reimbursement by implementing statewide fee schedules and dwindling carveout opportunities. Payer price transparency data is expected to accelerate the shift to value-based reimbursement models for MBH services. MBH providers who want to secure reimbursement increases should be focused on their differentiated value proposition and tracking measurable outcomes.
3. Integration of Primary and MBH Care Will Increase:
Regulatory agencies (e.g., HRSA, SAMHSA) and individual payers have developed new care models to support prevention, upstream identification, and treatment of MBH conditions before patients experience a crisis. While much of this work is in its infancy—and would benefit from continued provider/payer partnerships—models that promote colocation and collaboration between primary care and MBH providers will lessen downstream burden on emergency rooms and hospitals.
4. Modernization of MBH Facilities Will Continue:
Investment in new, MBH-focused facilities and programs has been significant over the last few years, with no signs of decreasing.
- UTHealth opened an academic psychiatric hospital in March 2022 to meet demand for both care and provider training.
- Children’s Hospital of the King’s Daughters in Virginia opened a $224 million Children’s Pavilion in April 2023 with plans for pediatric outpatient and inpatient services.
Organizations aren’t just building new MBH facilities—they’re updating existing ones. Historical underfunding for MBH for existing structures, compounded by a loss of psychiatric beds over the past two decades, has led to these environments being passed over for major renovations. We expect to see a huge movement among healthcare design professionals to correct for this.
5. Nontraditional Partnerships Will Become the Norm:
MBH services should be viewed as a continuum. No one provider, payer, or program should or can serve every role that is needed. Effective MBH services will bridge traditional providers (e.g., health systems, physician offices) with community groups (e.g., crisis response teams, homeless shelters, advocacy organizations, peer mentoring groups) and PE-backed or for-profit providers (e.g., opioid treatment programs, eating disorder programs, substance use disorder facilities, app-based tele/mental health services) to efficiently craft care networks that support patients with MBH conditions and avoid unnecessary interventions. Health systems have led the way by exploring new business arrangements (e.g., joint ventures) with traditional MBH-focused providers such as Acadia. Organizations that are thinking about their portfolio of MBH services and honing in on areas where they can build efficient, integrated care will see improvements in clinical quality and financial sustainability.
Edited by: Matt Maslin
Published May 25, 2023
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