Outlook for Behavioral Health Companies Looking Good Following Rosy Earning Season

Several behavioral health-focused public companies raised their earnings and revenue forecasts for 2023.

Industry headwinds, including a more favorable workforce environment, the steady demand for services and payer rate increases, have led to several companies, including Talkspace Inc. (Nasdaq: TALK), LifeStance Health Group Inc. (Nasdaq: LFST) and Acadia Healthcare Co. Inc. (Nasdaq: ACHC) raising their revenue forecast.

“We really have an outstanding platform for growth and value creation, and the momentum in the business right now reinforces our confidence in the future and the work that [our employees] do every day,” Chris Hunter, CEO of Acadia Healthcare, said on the company’s second-quarter earnings call.


Franklin, Tennessee-based Acadia Healthcare’s confidence in its business and the wider macroeconomic environment inspired the company to increase its 2023 projected revenue range to between $2.86 billion to $2.9 billion, up from its previous projections of $2.82 billion to $2.88 billion. It similarly did so for adjusted earnings, estimated to be $655 million to $685 million, compared to its original projections of $635 million to $675 million from earlier in the year. 

Wage inflation at the company decreased from 7.5% in the first quarter of 2023 to 6.3% in the second quarter.

“While not all markets are the same, on an overall basis, the labor environment continues to show signs of improvement, positioning the company for continued stability in wage growth moderation over the remainder of the year,” Hunter added.


King of Prussia, Pennsylvania-based Universal Health Services Inc. (NYSE: UHS) similarly pointed to improved workforce dynamics for its upward adjustment of the low-end of its revenue and adjusted earnings projections.

UHS’ behavioral health business suffered a double whammy during the COVID pandemic: Premium pay for nurses increased at acute care hospitals, leading to many nurses leaving lower-paying behavioral health facility roles and for UHS to pay premium rates to staff its facilities. On top of that, lower staffing levels led to fewer operational behavioral health beds and lessened the amount of revenue those facilities could generate.

“The point that we’ve made for some time during the pandemic is that as COVID volumes eased, we would be able to hire more people,” UHS CFO Steve Filton said during the company’s second-quarter earnings call. “As we would be able to hire more people, we’d be able to generate more patient days, more volume, greater efficiencies, greater EBITDA growth.”

Still, UHS experiences no shortage of patients to fill its beds, emboldening it when it comes to payer relations. In the past, UHS has talked about aggressive negotiations with its lowest payers paying off with higher rates.

Filton echoed a similar sentiment on the company’s latest earnings call. 

“We’ve been able to leverage the fact that there are capacity constraints in the industry … and we’ve been going to our lowest payers and either demanding increases from them or canceling those contracts that we view to be inadequate and simply admitting patients whose insurance will pay us more,” Filton said. “Again, in an environment where we can only treat a limited number of patients, we can be more selective about who we treat and the fairness of what we think we’re being paid.”

Payers are also engaging with telehealth companies such as Talkspace, leading the company to generate higher-than-expected revenue in the second quarter. The company has made major progress in converting from a primarily direct-to-consumer (D2C) company to a primarily business-to-business (B2B) company. This led the company to upping its revenue guidance to $137 million to $142 million compared to $130 million to $135 million.

Talkspace had its first cash-flow positive quarter in the second quarter in 2023. The company expects to hit breakeven by the end of the first quarter of 2024.

Positive payer trends in the market reflect the imbalance of high demand and a limited supply of behavioral health services. Still, companies need to execute well to convert demand into financial success.

“In terms of utilization for our ability to appropriately fill our clinician schedules, we continue to deliver improvement, which has been sustained for three quarters,” Danish Qureshi, president and COO of LifeStance Health, said on the company’s second-quarter call. “We believe it is now appropriate to increase our go-forward productivity assumptions to reflect the performance in the first half of the year, which is factored into our higher revenue expectations for the second half of the year.”

LifeStance Health is the largest outpatient mental health care provider in the U.S. It experienced meteoric growth through a private equity-driven practice roll-up platform. Now, two years after its IPO, the company is focused on streamlining its business. This has included simplification of its payer contract load and several administrative functions like the phone system and electronic health record consolidation.

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