Outpatient mental health services provider Geode Health is expected to announce its first deal in the first half of 2022, according to sources close to the company.
If the deal comes through quickly enough, Geode will have behavioral health operations within a year of KKR & Co. Inc. creating and launching the company with one of its funds that cuts equity-investment checks in the $100 million to $200 million range.
The New York City-based global investment firm announced it was going to break into the behavioral health space by building its own company in June. Geode Health’s focus at the outset of its formation is on outpatient mental health services for adults and children in the U.S. but doesn’t yet treat patients.
It recently announced a stable of top-level executives with significant startup, health care and private equity-backed company leadership experience at the end of October.
This year alone is shaping up to be a defining year in terms of PE-backed dealmaking in behavioral health: 240 transactions compared to the 170 to 180 seen in the previous three years.
But Geode CEO Gaurav Bhattacharyya is looking beyond the headline-grabbing deals and recognizes a bifurcation in the M&A market. On one hand, platform deals that give scale are very competitive and increasingly expensive. On the other, the mental health practitioner space is largely made up of small operators.
“It is important to still ground ourselves in the fact that 95%-plus of providers in the mental health market are single practitioners or small groups,” Bhattacharyya said in an email. “We are looking to build a company that creates long-term value built on a sustainable platform, not just flip assets to generate a financial return.”
Bhattacharyya declined to specify exactly when the company’s first move toward either hiring or acquiring its first behavioral health providers will come, or what that will look like precisely. However, in an exchange of written statements, Bhattacharyya colored in around the edges of the company’s future.
Where Geode is looking for its first deals
Bhattacharyya told Behavioral Health Business that the company is focused on three regions for its core markets: Texas, the Upper Midwest and the Southeast.
He said it has active conversations with practices in each of its core markets. On a parallel track, it is also building out a de novo strategy at sites that complement the M&A objectives of the company.
“We have strong traction on both fronts,” Bhattacharyya said.
Geode’s focus in terms of what kind of providers the company wants to acquire is split in two: larger practices interested in further development, and small or solo practitioner offices that want to alleviate their administrative burden.
Geode will also need to make major investments in technology, both in terms of providing care and administering the business. This will include a focus on having hybrid options for care that Bhattacharyya says will allow for seamless transitions between in-person and telehealth modalities.
“Our intention is to partner with best-in-class tech solutions across the patient and provider experience,” Bhattacharyya said. “If we are unable to customize an existing offering to meet our needs, then we will consider developing our own.”
A strong tech backbone will also be key to supporting the company’s aspirations to enter value-based care reimbursement agreements with payers. Geode’s tech needs will include increasing access and speed to care for patients, tracking care provided and tracking care outcomes.
Geode’s value-based care negotiations will focus on regions, rather than establishing deals with national payers, so that it can participate in risk-based arrangements as soon as they spin up meaningful operations in that area.
Assembling the executive team
Bhattacharyya has so far brought on a team that has extensive experience in establishing and growing health care companies.
“We have most of the senior team in place now,” Bhattacharyya said.
The company has about 10 support employees as well.
Geode’s C-suite recently grew with the hiring of Drew Dixon as chief financial officer and Michael Stroup as chief development officer.
Dixon comes to Geode from Pathway Vet Alliance, where he helped the company grow revenue 11x and EBITDA 15x during his four-year tenure. He has a 15-year background in leading PE-backed companies.
Stroup is a 30-year veteran of growing health care-related companies. He comes from Southern Veterinary Partners and, before that, was part of the United Surgical Partners leadership team.
Geode announced four other key new hires for top-level leadership. All of the new leaders will build out their teams as the company continues to search for leaders for managed care, clinical and human capital functions.
Chris Halajian, vice president of corporate development, comes to the role with over a decade of experience in finance and investing. In his most recent role, he founded and managed a mental health business that focused on improving access in rural communities.
Karina Akib, senior vice president of growth, and Lauren Garrison, vice president of business development, come from tech-focused health care startups.
Akib most recently co-founded WellNested, a software platform in the maternal health space that enabled providers to focus on delivering quality care. Garrison comes from the role of vice president of business development and physician recruitment at VillageMD, a rapidly growing national leader in value-based primary care.
Aaron Kelvington, vice president of revenue cycle, previously worked in the urology and dental sectors. Prior to that, he built the revenue cycle and contact center operations for MedExpress Urgent Care and the University of Pittsburgh Medical Center.
The new team will have several aspects of a new company to address. But Bhattacharyya laid out a key cultural focus of the budding company.
“Our ethos at Geode is to be provider-centric, so that they are liberated and supported to do what they do best, which is deliver exceptional care,” Bhattacharyya said.