LifeStance Health Group Inc. (Nasdaq: LFST) leadership is unperturbed by the widely regarded roll-up of Refresh Mental Health by Optum, the health services arm of the health care giant UnitedHealth Group Inc. (NYSE: UNH).
Even with LifeStance being the largest operator in the outpatient mental health space — with 5,000 clinicians at over 500 offices — the company occupies less than 1% of the market. By comparison, Refresh Mental Health has about 300 locations and employs over 2,000 clinicians, according to a previous news release.
“The fact that they employ 2,000, 2500 mental health clinicians — it’s just a spot in the market, it’s just tiny,” Michael Lester, LifeStance Health Group Inc. CEO, said during an appearance at the UBS Global Healthcare Conference. “So it has no impact on us.”
LifeStance sees the outpatient mental health space as a growing $220 billion total addressable market with about 95% of the relevant 650,000 clinicians operating in private practice — leaving a vast white space for the company to operate in.
Lester also cited the massive demand for mental health services far outstripping what even the collective mental health industry can provide, claiming that people have to wait six months to get mental health care.
The National Council for Mental Wellbeing, a behavioral health industry group, estimates that the national average wait time for services is about 48 days while a report in Massachusetts found wait times could trend as high as two months.
LifeStance specifically focuses on hiring psychiatrists, psychiatric nurse practitioners, psychologists and licensed therapists, Lester said. He described the first two clinicians as prescribers and the latter two as non-prescribers.
The company seeks to maintain a ratio of four non-prescribers to one prescriber.
Many attribute the long wait times to see therapists and related mental health clinicians to a shortage in the U.S. — on this, Lester also has a different take.
“A lot of people want to talk about there being a shortage of clinicians. In my opinion, there really is no shortage of clinicians — there’s a shortage of clinicians that accept commercial insurance because half of them are cash pay,” Lester said. “So that’s what creates the supply-demand issue with patients trying to find the clinician to be seen and taken care of.”
A 2019 Milliman study finds that behavioral health services were six times more likely to be provided on an out-of-network basis at primary care offices and four times more likely at specialists’ offices than compared to physical health care services in the same settings.
The Milliman study highlighted these differences in how insurance is used to pay for behavioral health and physical health care to illustrate a lack of compliance with federal reimbursement parity standards, a hot topic at the federal level.
LifeStance’s approach is to be in-network with as many commercial health insurance plans as possible. About 92% of the company’s revenue comes from commercial insurance, Lester said. LifeStance garnered $203.1 million in revenue in the first quarter of 2022 and $667.5 million in 2021.
When asked about building a D2C business and marketing, Lester pushed back.
“We’ve never had or now have any plans of spending any money on direct consumer marketing, but it’s important to understand where our patients come from,” Lester said.
During the company’s 2022 first quarter earnings call, Lester and other executives said the company was more or less immune to the high-marketing cost challenges that many other young mental health companies have recently faced. However, most of those other companies only offer care through telehealth.
About 30% of the company’s visits were conducted virtually, according to LifeStance Chief Financial Officer Michael Bruff. Lester was also joined by Danish Qureshi, who was recently promoted to the role of chief operating officer.
About half of all LifeStance patients come from local primary care providers and about 25% of patients come via self-referral and referral by payers each.