Connections Health Solutions, a behavioral health urgent care provider, has landed a $28 million Series B funding round.
Town Hall Ventures led the round. The new capital will go toward expanding the Phoenix-based company’s footprint, developing new services, developing new technology and supporting the company as it expands its value-based care delivery model. The company presently offers services in Arizona, Montana and Virginia.
“We’re filling this gap where demand radically exceeds supply. If you’re a patient who’s in crisis, your options are to wait eight to 10 weeks for outpatient care or eventually go to the emergency room, which is not a great destination,” Connections Health Solutions CEO Colin LeClair told Behavioral Health Business. “Town Hall specifically has a great history of investing in companies that serve the most vulnerable communities out there and doing so on a value basis — there was a lot of philosophical alignment.”
The Heritage Group also participated in the Series B funding round. In August 2021, Connections Health Solutions secured a $30 million funding round led by the Heritage Group.
Connections Health Solutions is leaving the round open for other potential investors to join. He added that the company recently won a state RFP process and expects to win another. The company is also in “advanced talks” with five other states to establish partnerships, LeClair said. To support that growth, the company intends to hire 450 more employees; it employs about 650 today.
The company partners with state and local governments, regional nonprofits and other community organizations to expand access to non-acute behavioral health care on an urgent basis. Specifically, it offers 23-hour observation units, crisis stabilization (or a sub-acute inpatient unit), outpatient mental health services, and discharge planning and services called “Transitions.”
The company accepts all patients. It often partners with payers, governments and other parties that fund organizations that treat the uninsured, underinsured, or other underserved populations. Connections Health Solutions and a similar organization, MIND 24-7, can operate in Arizona, partly because of the state’s unique approach to allocating behavioral health-related funds. Arizona has three regional behavioral health authorities (RBHAs) that control the distribution of all state and federal dollars related to behavioral health. The companies can receive funding for crisis services from these authorities regardless of a patient’s insurance status.
For years, behavioral health issues have been worsening in the U.S., and that worsening accelerated with the onset of COVID-19. This is especially true for children. One study found a doubling of mental health visits to emergency departments from 2011 to 2020.
Despite the growing need for more timely care, many states don’t have the regulatory infrastructure to enable urgent care and other non-hospital stabilization units. Connection Health Solutions and similar companies often have to lobby regulators and lawmakers to make a space for them to operate.
LeClair said the company is seeing success engaging with state and local governments and favorable trend changes, such as the increased interest in parity, aided the company’s success.
“Care for individuals experiencing a behavioral health crisis is a massive gap in our healthcare system,” David Whelan, co-founder and general partner at Town Hall Ventures, said in a news release. “We’ve heard from a number of leaders across health plans and state and federal governments that closing this gap is a near-term priority.”
The company has found the investment environment challenging, as reflected in any number of reports detailing a dip in investment in the behavioral health space. Rock Health reports that fundraising for digital health startups in the third quarter of 2023 has been the lowest since 2019. Still, mental health was the top-funded care indication, according to that report.
LeClair said more investors are approaching companies that fit their investing thesis with greater skepticism. Connections Health Solutions has an advantage in resolving skepticism because of the company’s longevity. It has operated for 15 years and racked up 800,000 patient engagements.
“The challenge for many companies is that they’re raising the sizzle, not the steak,” LeClair said. “They’re raising on the idea and the opportunity rather than actually delivering results. … We’ve got great data demonstrating the outcomes. And I think that was really what allowed the process for us to go smoother than it has for others.”
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