Top Behavioral Health Trends of 2021, Beyond

In 2020, the coronavirus put unprecedented strain on the behavioral health industry. Providers faced decreased revenues and increased costs, all as demand spiked.

While the new year is often associated with new hope, the reality is that COVID-19 will continue to shape the behavioral health industry in 2021 and beyond. That likely means we’ll see continued financial strain and widespread need for services, as well as a slew of new regulatory complexities as the federal government decides which COVID-19-related flexibilities to do away with.

But it won’t be all bad: The industry is poised to received more private investment and government attention than ever before.

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With all that in mind, here are a few trends Behavioral Health Business expects to see in the year ahead, as the nation looks to begin rebounding from the coronavirus pandemic. (Although if past year taught us anything, it’s to expect the unexpected.)

Increased demand for services

Demand for behavioral health services jumped significantly in 2020, with COVID-19 causing suicide attempts and drug overdoes to spike.

In fact, a recent study from the RAND Corporation found that as many Americans experienced significant psychological distress in the first month of the pandemic as in all of the year prior. Plus, 52% of behavioral health organizations reported seeing an increase in the demand for their services, according to a September survey from the National Council for Behavioral Health.

With the pandemic far from over, it should come as no surprise that that trend will continue throughout 2021. Millions of Americans are still grappling with unemployment, loneliness and uncertainty, and it could be months before that starts to change.

Back in December, Dr. Anthony Fauci, the nation’s senior official for infectious diseases, predicted that the U.S. could start to achieve herd immunity against the coronavirus by summer and return to normal by the end of 2021.

“I would say 50% would have to get vaccinated before you start to see an impact,” Fauci told NPR in mid-December. “But I would say 75 to 85% would have to get vaccinated if you want to have that blanket of herd immunity.”

But that was before the vaccine rollout began. At this point, the U.S. isn’t as far along in its vaccine as it previously projected it would be by January. In fact, as of Dec. 31, only about 1% of the nation was vaccinated, according to Bloomberg.

Still, Fauci says there’s hope the U.S. could return to normal by fall.

“I think it would be fair to just observe what happens in the next couple of weeks,” he told NPR earlier this month. “If we don’t catch up on what the original goal was, then we really need to make some changes about what we’re doing.”

Until then, behavioral health providers should expect to grapple with an even more pronounced supply-demand mismatch than usual.

Amplified investment, M&A activity

While increased demand will likely strain behavioral health providers, it will also win the industry even more investor attention. Pre-pandemic, interest in the space was already high, and now there are fewer viable targets in other health care sectors.

“Although we’re seeing steady recovery in a number of the elective- and procedure-based provider sectors, many of those segments haven’t yet seen volumes and financial performance return and stabilize at pre-COVID levels,” Burk Lindsey — managing director in the health care investment banking group at Raymond James & Associates — previously told BHB. “As a result, companies in segments that were relatively unaffected by COIVID — like home health and hospice — and those one could argue perhaps benefitted from COVID — like the vet space and behavioral health — are attracting greater interest than they otherwise might have. In essence, you have the same amount of capital chasing a smaller number of opportunities.”

As such, 2021 will be lush with behavioral M&A activity. In the several few days of the year, we’ve already seen at least five deal announcements. That includes Centene’s acquisition of Magellan Health, Odyssey Behavioral Healthcare’s purchase of Shoreline Center for Eating Disorder Treatmentand Summit BHC’s acquisition of Seabrook, just to name a few examples.

More federal funding, attention

In 2021, the behavioral health industry will also likely see more federal funding and attention, thanks to the negative impact the coronavirus has had on the nation’s mental health.

Like with M&A, that trend has already started to play out. In late December, President Donald Trump signed into law a $2.3 trillion stimulus bill, which includes billions in new behavioral health funding.

Plus, experts predict President-elect Joe Biden will usher in positive changes of his own after his inaugurated later this month. While it’s unclear exactly what Biden’s behavioral plans include, he’s long backed initiatives to benefit the industry.

As a strong supporter of the Mental Health Parity and Addiction Equity Act, he helped ensure that parity was included in the Affordable Care Act (ACA). Plus, he pushed for substance use disorder (SUD) treatment and mental health treatment to be defined as essential benefits under the ACA.

Under the Biden administration, parity enforcement will likely improve; attacks on the ACA will likely cease; and funding for behavioral initiatives will likely increase.

However, it’s also worth noting that more money means more scrutiny from regulators. As such, behavioral providers that accept federal funding and government payments should brace for audits in the year ahead.

Some financial failures

Finally, even with additional funding, some behavioral providers will be forced to close their doors in 2021.

Back in September 2020, nearly 40% of organizations told the National Council they were on the brink of financial collapse, with only enough money to survive for the next six months or less.

The industry will likely see some of those financial failures play out in the year ahead, as mom-and-pop providers struggle to deal with decreased revenues due to social distancing requirements; increased costs associated with PPE and telehealth technologies; overworked staff; and other challenges.