Seaside Leverages Home-Based Medicaid Model, Sets Sights on Five-Fold Growth

Seaside Healthcare may not be one of the most well-known names in the behavioral health space, but the company is hard at work establishing a national presence for itself.

Founded in 2009, the Shreveport, Louisiana-based company’s roots go back several years and are intertwined with Hurricane Katrina. That’s when Franklin Roemer, who had been living in the Midwest, noticed a need for behavioral health services in his home state to deal with Katrina’s emotional fallout.

Seeing the dearth of mental health care services in the state — along with the business opportunity it presented — Roemer relocated back home and helped open a psychiatric hospital. That hospital would be the genesis of Seaside Healthcare, which Roemer today leads as CEO.

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Today, Seaside operates more than 60 programs across Louisiana, North Carolina, South Carolina, Georgia, Texas and Virginia, providing psychiatric care, substance use disorder (SUD) treatment and dual diagnosis services. Backed by the PE firm Pharos Capital, Seaside treats patients of all ages and offers everything from acute care and partial hospitalization (PHP) to intensive outpatient programming (IOP), group home therapy and home- and community-based services (HCBS).

Already, Seaside has kicked off 2021 on an active note, announcing in early January the acquisition of two Virginia behavioral health providers, marking the company’s entry into the state. Seaside is also set to open a psychiatric hospital in New Orleans this month. Plus, it’s looking at five-fold growth over the next five to ten years.

To learn more, Behavioral Health Business recently connected with Roemer, who provided insights into Seaside’s aggressive growth goals, what it looks for in acquisition targets, why it’s so bullish on Medicaid home-based care and more.

You can read the conversation below, which has been edited for length and clarity.

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BHB: Since being established in 2009, Seaside has expanded into five states outside its homebase in Louisiana. Can you tell us Seaside’s origin story and why the company was established?

Roemer: I come from an investment background. I worked for a family fund in Michigan and decided after a couple of winters that I needed to be back in the south. I came back to Louisiana and was still working with that family fund. We looked at a lot of different things all over the United States, and we got pitched [to] a lot.

One of the pitches here in Louisiana was in response to Katrina. There was a dearth of services — geriatric psych services [and] psych services, in general — in New Orleans, and so the thesis was to develop a hospital. A team of clinicians wanted us to back them on that endeavor, which we did.

It was supposed to be a relatively passive investment. Any development [with] hospitals is especially hard with all the regulatory issues, building compliance and licensure [requirements]. I got more and more immersed in this project that was costing more money and taking longer [than expected].

Through that process of opening that hospital — and then making it successful — I got more and more involved in the day-to-day operations, learning more about the overall opportunity in behavioral health. I got more involved in behavioral health and less involved in the placement of money in external things.

We understood that there’s an incredible need for services. Then you run into problems: “Okay, there’s a need for service, but there’s not ample funding to make this a commercial endeavor.” You just keep peeling back that onion until you find a business plan. We opened that facility and started expanding our service lines to outpatient clinic [and] residential treatment facilities.

We were working with [the managed care company] Magellan at the time, and it was great that they could tell us what we needed — and what they needed that we could deliver. After several years of running these hospital-based businesses with satellite outpatient clinics and residential treatment facilities, they moved us into HCBS. That’s where our whole business plan really took off.

Why is Seaside so bullish on HCBS?

The big picture is while 20% of Medicaid enrollees have behavioral health conditions, this population makes up 50% of Medicaid spending. Every Medicaid payor/manager has learned, or is learning, that the nickels they invest in behavioral health services returns dollars on overall medical care cost savings. HCBS is an efficient, cost-effective way to provide evidenced-based, high quality behavioral health services, which includes treatment options all along the continuum of care.

Not only are HCBS efficacious, they also successfully address the monumental issue of lack of access to care. We bring the treatment to the patient, wherever that may be — whether it is the home, the school, a community setting or our clinics — through in-person or telehealth services. About half of our business comes from treating patients located in highly underserved rural markets. HCBS allows for an entire suite of services addressing the patient needs in an environment that is most comfortable and preferred by the client.

One of the major things Seaside likes to distinguish itself with is its continuum of care services? Provide some insight on that.

We do pretty much every service. We do acute inpatient, PHP, IOP and residential treatment. We do a whole host of [services] through the HCBS lines that are as highly acute as the inpatient.

[In our facilities,] you’ll have a psychiatrist on staff, registered nurses (RNs), master’s level social workers and techs. You might have 14 or 15 people on the team managing a caseload of 80 or so patients that are highly acute. They can float patients as they need more or less care. The idea is to provide care and keep them in maintenance programs that are the least invasive and the least intensive. Hopefully, you’re moving them down generally in their acuity in the program.

Seaside has now expanded into Virginia with its purchase of Second Chances Comprehensive Services and Simple Intervention. What drove the decision to expand into a new state and acquire these facilities?

We are looking for really good companies that we can acquire as a platform to expand services through geography, and that geography is primarily a state. Primarily, we’re looking at Medicaid products, [and] we’re building these platforms within states.

Each state runs its own platform. We do have some shared overhead involvement on a corporate level. That’s what we’re looking for when we move into different states. We’re looking for an excellent provider that we believe leaves us with a good platform that we can expand services throughout. In Virginia, we found a couple that really met that criteria and have a long history of doing excellent things.

We feel like we can expand our service lines through acquisition and organic growth, and those are things that we push every day.

We’re very acquisitive. We’ve purchased 20 to 24 companies over the last five or six years in the HCBS sphere. Virginia specifically has a lot of mom and pops in [behavioral health,] and it makes a lot of sense to add on to our business line.

What you’re dealing with is a situation where there’s far too much need for clinicians versus what’s available. Buying good companies solves that problem for you, if you’re able to do it in a rational way.

Did the company always have ambitions of growing into new states?

I’m interested in growing programs and seeing the incredible opportunity throughout behavioral health. That’s why I became CEO, because there’s that opportunity. The next logical step for us was HCBS services in Medicaid.

By diversifying into more states, you spread your risk. We want to spread our risk, and that’s why we’ve been really aggressive about planting these “platform seeds” — as I call them — through these different states, which we then add on to with acquisitions.

Organic growth through those states becomes the business plan of each state. But that’s why we’ve spread out, because our business plan was Medicaid-driven.

Then there’s these other service lines. Private insurance companies are going to use these products, and they tend to pay better. So we’re laying the foundation and being really efficient on the Medicaid side, but as these services get pushed out into these more lucrative payers, we think there’s an inherent advantage that we’ll have.

When you mention state-based platforms, you talk of how every state pretty much runs their own with some corporate oversight. Can you explain what that means?

Seaside has chosen to build a southeastern United States HCBS network through M&A, consolidations and organic growth.

Because Medicaid is our primary payor and because Medicaid is administered at the state level, our strategy has been to acquire top-of-class Medicaid providers in a particular state, establish statewide platforms, then build around it with add-on acquisitions and with a strong organic growth plan.

Our [goal] is to be one of the key providers of HCBS services in each state that we operate in. That means we offer a valuable service to the Medicaid program beyond excellence in care, such as providing a wide variety of service lines, infrastructure throughout the state, robust compliance tools and uniformity.

Over the last several years, HCBS has grown to more than two-thirds of our business. We look for that trend to continue with the several deals we have on the table for 2021.

What about any other future plans the company might have with growth?

We have a department that looks at a lot of deals. I really love that part of the business.

M&A is very much part of our DNA. We’re expanding hopefully to another state or two. We have some deals that we’re working on that we hope to close this year in two more states. We’ve focused around the southeast, but we’re certainly able to go beyond there.

There’s a lot of opportunity once we get into a state, learning [about] the payer environment, the other players, who the best potential targets are, who runs a really nice shop and the things that aren’t for sale.

[With] other companies, … most of the time they’re … commission-owned [clinician] businesses that have grown bigger than what they’re really wanting to do anymore. They’ve built a nice business, and we provide them an opportunity to cash out. They end up with a nice retirement, and they get to work with us. That’s our strategy.

Seaside has been financial backing by Pharos Capital since 2013. Can you talk about what the investment has meant for the company?

When you get a private equity partner, you don’t really think that you’re going to be with them that long. I don’t think they thought they would be with us that long either. But we keep adding more value.

They’re excited. They’ve been great partners for us. It’s enabled us to acquire things [and] get better credit with the lenders. We were so glad that they want to continue with us, because that’s unusual. Most of the time, you’re looking at a shorter-term than that. They’ve been great partners in that way.

How have Seaside’s services changed amid the pandemic?

There were a lot of restrictions on how to use telemedicine prior to COVID. They’ve relaxed a lot of those. Most of our revenue [currently] in the HCBS business is in telemedicine. I don’t see that going back.

If you’re talking about bringing access to rural and underserved populations, this has been a godsend. You’re able to do the work in a much more efficient manner than you were before. You’re able to leverage the clinician to see more clients. It’s forced that change to occur and you’re seeing really good outcomes.

What has been the history of Seaside using telehealth services, and how is it currently using such services?

We used it, but it had to be from a qualifying location. It couldn’t be in somebody’s house. That’s a real problem to get physicians to go out to rural areas.

At one of our clinics, we would have a telehealth site, and then the clinician could do it from his telehealth site. Now, you can do it from your phone. I can use my cell phone [and] call a patient at their home, which is a big change. I don’t have to travel to be able to perform the service to a registered site.

What other goals and hopes do you have for Seaside in 2021?

We’ve spent a lot of time over the last year evaluating who we are and what we want to be in the future. That leads to building infrastructure to be able to accomplish those goals. Now we’re thinking about, “How do we grow five times the size we are right now over the next five to 10 years? What do we need to put in place to be able to accomplish that?”

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