‘There’s A Lot of Growth in That Industry’: Addiction Treatment Viewed as Behavioral Health’s Top Expansion Area

More than 40% of polled behavioral health industry insiders believe the addiction and substance use disorder (SUD) treatment space has the most significant growth opportunity moving forward.

That’s according to a new survey from Kipu and Behavioral Health Business, which included answers from 164 clinical and administrative staff members, C-suite level executives and others about the changing landscape of the behavioral health industry. 

“There’s a massive crisis in mental health and, particularly, in addiction and substance use disorders, and that’s been exacerbated by the pandemic,” Dean Fitch, co-founder of Avea Solutions and principal at Kipu Health, said on a BHB webinar. “And so, there’s a lot of growth in that industry. There’s a lot of movement, a lot of transactions there.”


Founded in 2012, Kipu is a behavioral health-specific EHR provider. The company has raised roughly $20 million in venture funding, according to Crunchbase..

Of the 164 professionals surveyed, about 40% said they thought SUD treatment would drive the most behavioral health transaction activity throughout the coming year. Another 38% said therapy and counseling services would drive M&A action, with 15% pointing to psychiatry.

There have already been several deals in the SUD space this year. For example, Recovery Centers of America acquired Adolescent & Young Adult Advocates, TPG Capital invested in Banyan Treatment Centers and PE firm Harmony Health Group purchased three facilities previously operated by the now-defunct Delphi Behavioral Health Group.


And deals in the behavioral health space may even be on the rise. In fact, 38% of survey respondents said their company was more likely to acquire another organization now than a year ago. Another 35% were neutral on the topic and only 27% said their organization was less likely to acquire another organization.

Private equity investment is the most common strategy providers are eyeing to grow their business, with about 45% of respondents considering this strategy. Joint ventures were also popular, with 41% of survey takers considering this avenue.

While private equity deals have slowed down somewhat this year, there are a number of notable transactions. For example, PE firm Comvest Partners purchased Your Behavioral Health and Eads Bridge Holdings invested in Stokes Counseling.

Barriers to care 

While the behavioral health field may be growing, the industry still faces many challenges.

Provider shortages continue to be a top issue and a barrier to patients receiving care. In fact, 38% of industry insiders polled in the BHB-Kipu survey said insufficient provider availability was the most significant challenge patients face when receiving treatment, followed by financial pressures.

Additionally, 54% of industry insiders reported staffing as the No. 1 growth challenge for behavioral health care providers.

Still, some advise that providers prioritize quality and fit over quantity when hiring.

“I think that as a CEO of a treatment center operator, we are sometimes responding to the pressure that we’re under and trying to put butts in seats,” Michael Castanon, founder and CEO of Alter Health & Mindfuli, said on the webinar. “We want to meet that demand. But what I’ve experienced is if you’re a little more selective, if you get more insights into that individual, they’re going to align better, and the retention is going to be greater. And then, ultimately, who’s going to benefit most from it? The client. Through that, the economic benefits are multi-faceted.”

Alter Health is a residential treatment program specializing in primary mental health issues and co-occurring conditions. Mindfuli is a digital coach that offers on-demand therapy and psychiatry.

To meet these and other challenges, survey respondents said their organizations are responding by increasing the use of technology, adding more providers, adding more treatment locations and adding more service lines.

While most providers are interested in increasing technology, almost half of the survey respondents said financial investment was the most significant barrier to implementing new technology.

But Castanon advised that providers can do it in stages.

“I’ve never seen a technology platform roll out perfectly without any glitches. There’s always going to be something, but you price that in,” Castanon said. “Try to find the most cost-effective, easiest solution to implement that meets your needs, and then iterate from there. This thing’s iterative. You’re not trying to build the best-in-class solution out of the gate. Start with version 1.0, a minimally viable solution, and then iterate from there.”

Providers could also see legislation to help with the financial barrier to implementing care.

Earlier this month, Lawmakers introduced a new bill that, if passed, would extend funding for electronic health records (EHRs) and other technologies to behavioral health providers. Behavioral health providers were left out of the 2009 HITECH Act, which gave health care providers funding to encourage the “meaningful use” of EHRs.

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