Even with Telehealth as New Normal, Many Behavioral Health Providers Keep Pursuing De Novo Growth

Some outpatient behavioral health companies are continuing with bold de novo growth strategies even while telehealth continues to have a major impact on the sector.

Telehealth has swiftly taken over many aspects of outpatient visits in the behavioral health industry in just three years. Multiple studies and reviews show that telehealth has had and continues to have a greater impact on behavioral health than other segments of the health care sector.

For example, 57.9% of all telehealth visits were related to behavioral health diagnoses in 2021, according to a study by Trilliant Health. In the six months before the COVID-19 pandemic picked up in the U.S., less than 1% of mental health and substance use disorder outpatient visits were done via telehealth. Then that percentage share jumped to 40% from March 2020 to August 2020, according to an analysis by Kaiser Family Foundation.

With this as the backdrop, it may seem surprising that many behavioral health providers are continuing to build de novo centers for in-person care, rather than going the route of one leading mental health company that is taking a different approach to growth with the onset of high telehealth usage.

Scottsdale, Arizona-based Lifestance Health Group Inc. (Nasdaq: LFST) — a giant in the outpatient mental health care space that operated 534 locations at the end of 2021 — has moderated its de novo growth efforts because of its high telehealth utilization.

Telehealth visits continue to be high for Lifestance — at about 80% of total visits. The company was founded on a hybrid model of in-person and telehealth visits and has the flexibility to operate in either mode to accommodate patient or clinician preferences. But the company will slacken the rate it will open new locations to “improve profitability,” Michael Lester, CEO and founder of Lifestance, said during the company’s fourth-quarter and full-year earnings call for 2021.

Lifestance plans to open up to 80 to 90 de novo locations in 2022, up to 75 of which will open in the first half of the year. In 2021, the company opened 106 de novo centers. It opened 120 de novo centers from March 2017 (when Lifestance was founded) to the end of 2020, according to public Securities and Exchange Commission filings.

“Given the flexibility of our hybrid model, we can flex the pace of physical location expansion based on current and projected patient/clinician demand for in-person visits while continuing to aggressively grow our total clinician base, which is the primary driver of revenue growth,” Lester said on the call.

When asked if Lifestance would close centers to better align with the high telehealth demand, Lester said that the high rate of telehealth had no impact on Lifestance’s business because the company has secured reimbursement parity from most of its payer partners — most of which are commercial insurers.

High telehealth use doesn’t slow de novo growth for Mindpath Health

Lifestance has been one of the fastest-growing mental health companies in the United States. The company’s management also focuses its expansion efforts on the number of clinicians in its employ. Lester said that he believed that the company could double its clinician workforce and not have to open another center because of its hybrid model.

But even for other organizations that have telehealth built into their models, the major shift to telehealth has not impacted how they approach de novo growth.

In the early days of the pandemic, all of Mindpath Health’s visits were telehealth. Telehealth utilization has settled to a range above 80% and up to over 90% at times since then. But Julie McCarter, chief commercial officer for Mindpath Health, told Behavioral Health Business that the fast-growing mental health company’s approach has always contemplated “toggling” between in-person and telehealth.

For example, she said that opening a center with 10 offices can support 20 or more clinicians because of the ability to provide care 100% in the office, in a hybrid of in-person and telehealth, and 100% telehealth.

“So our focus right now is really expanding the [number] of clinicians that we have available to treat the patients — that we can reach in those markets,” McCarter said. “So, think about [Mindpath’s] growth in terms of density in 2022. And we will absolutely continue to cast growth into additional states.”

Sacramento, California-based Mindpath operates over 100 locations in Arizona, California, Florida, North Carolina, Ohio, South Carolina and Texas. It also employs about 700 clinicians.

The company will soon expand into an eighth state, McCarter said, without naming the state.

Mindpath has about a dozen clinics that are “in flight” now. McCarter declined to specify how many clinics the company will open in 2022.

Patient connection driving de novo growth

Mindpath said the company also offers transcranial magnetic stimulation in its office. This is a service that simply can’t be translated to telehealth.

Drug testing similarly must be done in the clinic for addiction treatment centers. Similarly, other elements of what is done in a substance use disorder (SUD) clinic simply can’t be replicated through telehealth.

Kennewick, Washington-based Ideal Option PLLC, which operates 74 clinics in 10 states, has seen telehealth services take up about 10% of all daily visits. The company sees telehealth usage as supplementary but it has become a “staple and part of our business now” since the onset of the pandemic, Ideal CEO Tim Kilgallon told BHB.

Ideal Option plans to add another 12 locations in states where it already operates and expand into one more new state in 2022, Kilgallon said.

Telehealth is good for handling overflow visits or accommodating the unique needs of specific patients. Patients that are in long-term recovery also benefit from telehealth use.

“[Telehealth is] really not a replacement for in-clinic treatment,” Kilgallon said. “I thought this would really accelerate a migration away from in-clinic towards telemedicine for our business. But it didn’t do that. It didn’t do that at all.

“What we saw is that when we relied too much on it, people relapsed.”

Ideal Option’s experience is that patients prefer to get care via in-person visits when they are in the earlier stages of recovery, Kilgallon said, adding that the sense of support and community needed to facilitate recovery can’t be replicated via telehealth.

He also cited an accountability element. When it comes to medication-assisted therapies, he said that people who have seen their lives and health degraded by addiction need more from providers than just a prescription.

The only thing that limits Ideal Option’s de novo growth is the present workforce shortage of the required clinicians and the “inconsistency of reimbursement across the landscape of plans.”

Ideal Option has about 300 payer relationships and many offer different reimbursements for the same care.

On the other side of the de novo and telehealth spectrum

Brentwood, Tennessee-based Spero Health saw telehealth utilization spike as high as 90% just after the onset of the coronavirus pandemic, its CEO Steven Priest told BHB.

But today, the mental health and SUD care provider sees about 25% of its encounters being managed via telehealth.

Telehealth utilization has not impacted its de novo growth strategy. The company is also in an unabated growth mode. In 2021, the company opened 24 de novo centers and plans to open 24 “plus one or two depending on schedules” in 2022, Priest said.

“We believe that this hybrid model of in person when you need it and [telehealth] as a tool in that clinical care model [is] the approach this patient population needs over the long haul,” Priest said.

Companies in mental health and SUD care ultimately have to pick a model of care that works for their patients and appears viable as a business, and Priest acknowledged that there appears to be a wide range for the use of telehealth in those spaces.

But Spero’s approach maintains that physical locations are vital to patients’ success.

“We are believers that addiction is a disease of disconnection,” Priest said. “There is a lot to be gained in the clinical care of our patient population, to be able to be engaged on a face-to-face and a personal level.”

However, Waltham, Massachusetts-based Groups Recover Together has fully embraced telehealth. It similarly had a near-total pivot to telehealth. But instead of swinging back to in-person, it has established a hybrid model.

Cooper Zelnick, chief revenue officer for Groups Recover Together, told BHB that the group recovery and medication-assisted therapy provider has been able to track and validate that patient outcomes were equally as strong in the telehealth model of care.

Since the start of the pandemic, Groups Recover Together has opened more than 50 offices, Zelnick said. He added that the uncertain regulatory environment behooves Groups Recover Together to have clinics, should regulations make it impossible to do telehealth only after the pandemic. Plus, the company embraces the community and the preferences of patients.

“We don’t want to make the bet that the regs are going to let us serve everyone via telehealth,” Zelnick said. “We really feel that, despite the power of telehealth, being local is important … And even just having a space where our members can informally drop in is really important to us.”