Behavioral Health Companies Looking to Grow Their Enterprise Business ‘Still Need to Build The D2C Acquisition Muscle’

Several digital behavioral health companies are making the move from direct-to-consumer to business-to-business models, looking to create a larger market share.

While a B2B approach may lead to a more extensive client base, companies looking to make the leap must be prepared to add higher privacy standards and the proven ROI that corporate entities expect. Still, companies with a strong D2C marketing strategy may have a leg up, as more enterprise contracts include engagement clauses and shy away from the per member per month model.

“There was a sense of a really clean distinction between a direct-to-consumer model and an enterprise model,” Dr. Ben Robbins, general partner at Google Ventures (GV), said at the Digital Healthcare Innovation Summit. “And those distinctions are probably false.”

Robbins noted that typically both B2B and D2C companies end up engaging with large traditional insurers or employee benefits.

GV was founded in 2009 and has over $8 billion in assets under management. The venture capital firm has deployed more than $1.2 billion in health care and life sciences since 2020. Earlier this year GV, invested $28.1 million in serious mental illness-focused startup firsthand.

The bulk of behavioral health tech startups want to offer their patients multiple ways to pay for their service, Robbins continued. Some startups are looking to offer both D2C and B2B services.

For example, over the last year, virtual behavioral health provider Talkspace (Nasdaq: TALK) announced its transition from a cash-pay D2C provider to a B2B-focused entity. At the same time, Talkspace still offers D2C care.

But offering both models isn’t a magic bullet. It creates a lot more work for the company.

“You’re doubling your number of stakeholders. Not only do you have your internal teams, but you have your clients, patients and then you also have customers on the health plan side,” Julia Bernstein, head of operations and strategy at Thirty Madison, said at the conference. “So you’re taking on more reporting, you’re taking on twice the amount of technical build, you’re starting to answer questions about HIPAA and integration and SOC 2 and all these words that make CIOs shiver in their sleep.”

Thirty Madison is a digital health startup with D2C and B2B offerings. Its services include migraine, hair loss and sexual health products.

Before coming to Thirty Madison, Bernstein worked as the COO for alcohol use disorder platform Tempest and vice president of strategy and development at behavioral health provider Beacon Health Options.

It’s not just providers interested in making more deals with companies. Employers ranked mental health as the top area of focus for their health care vendor strategy in 2024, according to a survey from WTW.

But payers and employers also expect more when it comes to proving ROI and efficacy of the product. In a WTW survey, 78% of participants said they need to see a clear return on investment from their point solution partners.

“You have to be really clear about your strategy from the beginning. You have to invest in outcomes,” Bernstein said. “You have to gather data. You have to think about ROI. And then you also have to understand the lift that you’re taking on.”

Putting D2C learnings in a B2B environment

Despite the challenges associated with moving to a B2B market, companies that got their start in the cash-pay space may have an advantage in customer acquisition.

Even if a provider lands a B2B contract, payers and employee assistance programs (EAPs) are shying away from the per member per month model. This puts more pressure on providers to engage and retain members – something many historically cash-pay startups have had to do from the get-go.

“From a pricing standpoint, … we’ve moved away from the per-member-per-month [model] because we’ve been overpaying for services for years. It really is about paying you for the services you provide,” Candace Jodice, former vice president of benefits at CVS Health (NYSE: CVS), said at the conference. “So we would much rather have you come to the table with a per case or per engaged member price. And before we even start talking to you.”

Payers and employers are becoming more creative with provider contracts, partly by turning to value-based models. But even in these new contracts, engagement is crucial. Indeed, 56% of employers in WTW’s survey reported low member engagement was a key challenge.

Engagement goes one step further than patient acquisition. In a B2B model, it could also mean getting providers on board to recommend a virtual health solution.

“Now we’re lucky enough to have care delivery services that are starting with value-based contracts,” Bernstein said. “But you still need to build the D2C acquisition muscle. Patients don’t magically appear using that contract with United. And in many cases, you are taking a third stakeholder in a B2B relationship, which is a referring provider. It’s not only B2B2C, but it’s [business to business to provider to consumer], and so it’s going to be very interesting to see how this all comes together.”

Payers creating avenues for startup providers

Another major hurdle for behavioral health startups looking to enter the B2B market is catching the attention of a larger payer or employer.

To ease this burden, some payers have set up opportunities for providers to showcase their offerings.

“One of the things we’ve tried to do at Blue Cross Blue Shield is create a cross-section of strategy, business development, network contracting, medical management, coming together to hear pitches from point solutions, and it gives us an opportunity to like a bake-off,” Michele Courton Brown, vice president of business development at Blue Cross Blue Shield of Massachusetts, said at the conference. “So if there are organizations that are looking at behavioral health, for example, we bring in a couple of behavioral health organizations to vet them all at the same time. So we can do a bit of compare and contrast.”

One of the most important aspects of catching a payer or employer’s attention is providing a solution they need. Brown noted that most successful vendor collaborations come when point solutions are designed with the payer partner.

“We have a relationship with Headway, a mental health organization, and I believe our No. 1 call into our call center is for mental health support. So the demand is high, supply is low,” Brown said. “We have been pleasantly surprised at the uptake in that partnership. But it started with us having a mutual priority and an ability to work together.”