Behavioral Health Joint Ventures Sprout as Demand Rises

A new report by VMG Health examines the trend for non-profit hospital systems to form joint ventures with for-profit behavioral health providers, stating that the combinations have become more common in recent years due to the surge in demand for behavioral health services, limited bed capacity, and the ability for “both the non-profit and strategic operators to achieve benefits.”

Authored by William Teague and Cody Taylor, VMG research pointed to examples of joint ventures across the country, such as Acadia Healthcare and Bronson Healthcare announcing plans for a 96-bed facility in Battle, Mich., Beaumont Health and UHS establishing a joint venture for a new 144-bed facility located in Dearborn, Mich., and Kindred collaborating with Baystate Health to build a 120–bed behavioral health hospital in Massachusetts.

VMG expects the joint ventures to roll on in the coming years, as does Ashraf Shehata, partner, Advisory Industry Leader, Health Plans, KPMG, who spoke to BHB about why this is the case.


“We had a wait-and-see situation where people were evaluating the market when Covid hit,” he said, but soon thereafter the joint venture deals started to come quickly as the profile for behavioral health and mental health services rose in conjunction with the use of telemedicine technology during the pandemic.

“Private dollars started lining up pretty quickly,” Shehata said. “The market had been pegged to grow at low single digit rates in prior assessments, but now after Covid we have seen the impact of behavioral health across the care continuum. This has come at the same time as the acceleration of telemedicine and the focus by employers and health professionals on the impact of behavioral health.”

Segmentation Drives Growth


The joint ventures have also ripened as the market has approached the delivery of behavioral health services in a different way by segmenting what type of care is being offered, he said.

Now, in addition to the traditional care in an emergency room setting or via counseling services, there is the segmentation by disorder driving mental health and substance abuse delivery.

“We are starting to see disorder-based partnerships, like for alcohol abuse, or those with bipolar disorders, depression, PTSD, substance abuse, eating disorders. People are saying let’s look at these sub-categories and really find ways to accelerate access and this has improved the market and the growth potential,” Shehata said.

Traditionally a low reimbursement slice of the healthcare sector when it comes to Medicare, Medicaid, and health plans, he said the increase in demand for services, the attention by health plan sponsors to pay more attention to mental health, and the aforementioned technology advances, have made the business model for joint ventures workable.

“The unit cost will stay where it is given all the other demands on the healthcare system,” Shehata said. “But, I think as you see much more access granted to those mental health professionals using technology, it will make sense. Remember, total reimbursement includes the unit payment rate times volume.”

Acadia Makes Joint Venture Moves

One behavioral health provider active in forming joint ventures is Acadia Healthcare, which among other projects is working in collaboration with Lutheran Health Network of Indiana LLC to build a new 120-bed behavioral health hospital. The facility will provide inpatient and outpatient treatment for residents in Fort Wayne, Ind., and nearby counties.

Acadia says the hospital is expected to open in 2022 and will serve adolescents, adults, and senior adults who are struggling with acute symptoms of mental health disorders.

A spokesman for Acadia said the company now has “13 partnerships in place with premier health systems across the country who share our vision and mission of serving patients with quality and compassionate care, providing healing and hope to those in need.”

The specific project in Indiana results from the critical need for behavioral health services in the Fort Wayne area. “This joint venture will provide much needed resources when the facility opens – with an opportunity for expansion down the road,” the spokesman said.

In general, Acadia views joint ventures as furthering the company’s belief in the value of strong partnerships as they help make a greater impact on the communities it serves “in a way we could not as individual entities. We are able to combine the strong local presence of the partner health system with our expertise on behavioral health services,” the spokesman said.

Joint Ventures Offer Benefits

VMG said the joint venture players, led on the provide side by Acadia and UHS, are benefitting in different ways than their health system partners. A non-profit hospital, they said, often sees behavioral health patients admitted through the emergency room and this high demand has caused occupancy issues at the hospital.

“Entering into a joint venture often provides a new facility off-site, with expanded capacity to free up med-surg beds for other uses and relieve emergency room pressure,” VMG said.

From a for-profit operator perspective, some of the major motivations behind the joint venture model are the ability to access new markets without the potential of competition from major established providers like the local health system and the opportunity to leverage the hospital reputation and trade name to improve facility visibility in the marketplace.

There is also the fact hospital emergency rooms act as large referral sources to behavioral health facilities, VMG said.

Written by Patrick Connole

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