Mental Health Partnership LLC has raised $5 million to fuel the outpatient mental health provider’s growth strategy.
Scott Farber, CEO and founder of Mental Health Partnership, told Behavioral Health Business the Ames, Iowa-based organization is looking to invest in technology, M&A, de novo expansion and adding more profitable services to individual practices.
And Mental Health Partnership is building this ecosystem with small therapy practices and in underserved areas.
Mental Health Partnership made its first acquisition — of Central Iowa Psychological Services — in 2020. Today, the company operates about a dozen offices and four practices across Iowa, Idaho and Texas.
It operates the OHM Mental Health Wellness Center in Lewiston, Idaho and will soon open a location near the military base in Fort Hood, Texas, called the Mindset Counseling Group. The Texas and Idaho practices are the company’s first de novos.
Mental Health Partnership used the funds to acquire a minority ownership stake in behavioral health technology provider TheraManager LLC.
TheraManager offers integrated electronic health records, revenue cycle management, telehealth and practice management tools specifically for behavioral health practices. It’s used by about 1,000 practices and used by as many as 7,000 providers, Farber said.
Participating as an investor in TheraManager gives Mental Health Partnership access to tech tools that are vital to the type of care and management it wants to provide.
“Having that tech as a piece of the play makes an extraordinary difference because now you can create digital outcome measures to drive better care — you can enhance billing for practices so they can get better margins and hire more people,” Farber said. “We see the outpatient mental health play both as a practice acquisition strategy to expand services … You put together the acquisition strategy, you add in that technology overlay, and now you’ve got kind of a virtuous ecosystem that becomes self-reinforcing.”
The use of technology is a vital but painful point for behavioral health providers. Tech solutions, especially electronic health records, are seen as essential tools while at the same time being used at remarkably low rates compared to health segments of health care.
Mental Health Partnership focuses on acquiring smaller behavioral health providers that have slim margins but aren’t fundamentally distressed. Farber described them as “mildly stressed assets.”
To boost margins, Mental Health Partnership adds service lines such as esketamine treatments and transcranial magnetic stimulation (TMS). It also offers partial hospitalization and intensive outpatient programs and medication management.
The company also keys in on better integrating the practices into the health care community through partnerships with local hospitals, other medical groups, jails and schools.
“Community mental health is so often in silos,” Farber said, adding that smaller hospitals and schools often need the expertise of behavioral health providers to meet immediate needs and route patients to the care they need.
The investment also pads the company’s balance sheet to cover provider salaries, building the leadership team and acquiring more practices. The company pays providers through salaries rather than per appointment.
“Part of what we wanted to do was move towards a salary system with incentives above it,” Farber said. “And that requires cash outlays because you’re not paid by insurance Day One.”
Looking forward, the company hopes to launch partnerships with community stakeholders during the first quarter of 2023. It will acquire more practices but won’t “go on a buying spree.”
“We like the land and expand strategy,” Farber said. “The states that are particularly interesting to us are Oregon with psilocybin coming online this year and Colorado for next year … We’re not trying to just do a massive land grab across the country. We’re trying to stay focused.”
Farber notes the proximity of Idaho and Oregon as another reason for interest in the state.
Farber acknowledges the different approach his firm is taking to expansion by focusing on smaller practices. His focus is less on building a behemoth platform company and more interested in building a sustainable and replicable business that can be replicated in areas that need increased access to care.
About 48% of the American population resides in an area the federal government has deemed to be a mental health care professional shortage area.
He said he hopes the approach is applicable in both urban, suburban and rural areas that are underserved. Mental Health Partnership’s model could provide a useful contrast to other big-dollar consolidation plays, said Faber.
“How can we continue to think about being our brothers’ or sisters’ keepers, if we’re saying that’s not attractive enough from a business model perspective,” Farber said. “What we want to be able to prove is that this is [an attractive model] and that it is possible to be able to do this and there isn’t a one size fits all sort of model for mental and behavioral health, because this can be done without raising $100 million.”
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