Lifestance to Focus on Organic Growth After Recent M&A Spree

LifeStance Health Group Inc.’s (Nasdaq: LFST) top leaders say that the company will see its expansion continue more through organic growth in 2022 and beyond.

CFO Mike Bruff told the listeners of a virtual chat at Evercore ISI’s HealthCONx Conference that the Scottsdale, Arizona-based hybrid behavioral health company is coming off of a streak of acquisitions in 2020 and 2021 that it used to open new markets.

Now, the company will tap its organic growth strategy to deepen its presence in those markets.


“It has always been our intent and our expectation that we would start to trend more of our growth coming from organic sources, and we believe that that’s still going to be true,” Bruff said during the chat.

The company previously targeted expansion into 36 states, said LifeStance Health CEO Michael Lester, who was also part of the discussion. LifeStance now operates in 31 states and has increased that goal to operate in all 50 states.

Bruff hedged on the extent to which LifeStance Health would shift its growth strategy to more organic growth by saying that management doesn’t put specific parameters on what share of its growth is organic or inorganic and that the company will consider deploying more capital for a deal in an existing market if the returns are expected to be good.


“Ultimately, the way that we think about this is once you get through a ramp period, whether you’re a new clinician hired or new clinician acquired, you ultimately become a LifeStance clinician. So that’s why we’re a little bit indifferent as to where we source those clinician adds,” Bruff said.

LifeStance’s new state market expansion strategy focuses on acquiring the “best-in-class” and, ideally, the largest provider in that state. It will then “execute on our de novo strategy and do more tuck-in acquisitions to develop market power in that particular state,” Lester said.

The company identified and prioritized those previously targeted states by looking at their population. For states with smaller populations and low population density — Lester specifically mentioned South Dakota and Montana — LifeStance may not add a clinic in the state and may opt for a virtual-only option.

The shift to more organic growth has at least one impact in the present: “We are hiring more clinicians than we are acquiring today,” Lester said.

Of the roughly 6,000 people employed by LifeStance, about 4,400 are clinicians.

Founded in 2017, the company has grown at a rapid clip and made waves by going public in June 2021.

In April 2020, it employed about 2,000 clinicians. At the end of September 2021, it employed about 4,375 clinicians.

Bruff and Lester said in the Evercore chat that LifeStance is so focused on being a “destination of choice for clinicians to work” that its fundamental growth metric is the number of W-2 clinicians it has on staff, even going so far as to downplay the importance of counting clinics and how many staffers operate in clinics.

Lester reiterated comments that he made during the company’s third-quarter conference call that LifeStance is redoubling its focus on clinician retention and the clinician experience. This includes rolling out a stock award program for clinicians.

The company is also tooling its technology strategy around the clinician experience in addition to the patient experience with its platforms.

“​​A lot of people tend to forget the clinician experience here. So matching the right patient with the right clinician is really key,” Lester said. “And most people think about making sure that we get the patient to the right clinician. Really, the clinician wants to see the right type of patient that they like to treat as well. So this thing goes both ways.”

Specifically, LifeStance is working on streamlining its developed-in-house booking, intake and matching technology for both patients and clinicians.

LifeStance is experimenting with value-based care models in partnership with an integrated care clinic and considering providing care to Medicare patients, Lester said. But it’s currently exclusively focused on providing in-network care to commercially insured patients. It has contracts with over 250 payers.

LifeStance’s IPO share price launched at $18 per share. As of Friday morning, company shares were valued at about $8.80.

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