Investors Foresee Cost of Care Attribution, Payer Landscape As Thorniest Issues for Behavioral Health Value-Based Care

Value-based care has been a buzzword for decades in behavioral health, but the bulk of providers have yet to make the leap from fee-for-service to a risk-bearing or even cost-savings model.

This could be changing as payers begin to prioritize value-based care contracts. In turn, this could reshape dynamics between providers and their investor partners.

While some investors are ready to dip their toes into the value-based care market, many question the evolving payer landscape and how behavioral health providers get credit for physical health outcomes.


“Reimbursement is an important part of these innovative care models. I think that’s coming faster than we think in the behavioral health space,” Corbin Petro, founder of Eleanor Health, told Behavioral Health Business. “I hear that from investors as well that they’re excited about that movement and what that means for the areas that they can invest in.”

Waltham, Massachusett-based Eleanor is focused on providing addiction and mental health care on value-based payment models. Petro served as the company’s founding CEO until earlier this year, when she stepped down from the role.

While many investors are cautious, the venture capital industry has poured hundreds of millions of dollars into behavioral health companies taking a value-based care approach. In addition to Eleanor Health, which has raised about $82 million in funding, virtual substance use disorder (SUD) provider Pelago has raked in more than $78 million, and opioid use disorder provider Groups Recovery Together has raised at least $98.2 million.


While there is a lot of opportunity in the value-based care space, many companies operating in such models have faced roadblocks. For example, population health organization Cityblock, which offers physical and behavioral health services, laid off 155 employees – about 12% of its total workforce – in June. Eleanor also trimmed its workforce, laying off between 18% and 20% of its staff last December.

Although there are some prime examples of value-based care models in behavioral health, primary care remains the hot spot for these arrangements and investments.

“There’s definitely been a lot more [value-based care happening] in primary care. But then people are trying to make it work for more specialty care,” Christina Farr, a principal at OMERS Ventures, told BHB. “And that is still very much in flux and emerging, but most care is still fee-for-service. So this is all early, and I think it’s the right thing and we should continue to move in that direction. But … we still have a ton of work to do.”

OMERS Ventures is an international venture capital firm with offices in Toronto, London and Palo Alto, California. Some of its digital mental health portfolio companies include Muse by Interaxon and HelloSelf.

Who gets the credit?

Since primary care has been at the heart of new value-based care models, there is something of a chicken-and-the-egg issue with determining the total cost of care and attribution.

Behavioral health care often helps improve a patient’s overall health outcomes, but it can be hard to figure out which provider or entity to give credit to.

“There’s this whole question of how do you measure the value if most of the value derives from reduced medical care costs,” Terry Hyman, managing partner of Northwood Healthcare Partners, told BHB. “Then you have a whole complexity around attribution as to what the driver of savings was there.”

Northwood Healthcare Partners is a private equity firm specializing in health care. It has previously invested in SUD provider Summit Behavioral Health.

Hyman said he struggles with the question: Are the payers prepared to help untangle this paradigm? While behavioral health outcomes are linked to improved physical health, if payers aren’t prepared, there is less of a business case for investing in these models.

Conversely, physical and behavioral health integration could be an investment opportunity, especially in models that can support primary care providers. But investors still have a lot of questions about how these partnerships work.

“How do you tie in the primary care physician into this because there has been a reluctance to manage behavioral health, which is kind of why collaborative care has taken off,” Farr said. “So how do you bring the PCP into this mix when you’re doing something more value-based? And then how do you make sure you reach the patients who need help, not just the ones that are obviously crying and melting down in the physician’s office, but where it may not be as clear as that, and the PCP really needs to ask the right questions.”

One place where these models could be tested out is with “payvider” organizations. For example, in 2022, UnitedHealth Group’s (NYSE: UNH) health services division, Optum, acquired behavioral health provider Refresh. The deal gave Optum the unique ability to collaborate with other parts of the health care ecosystem, including primary care and payers.

“The plan [is] for us to align that primary care capitation model over time. …This [is an] opportunity to try some of these things out in arrangements where we don’t get burned,” Steve Gold, CEO of Refresh Mental Health Services, said during BHB’s 2022 INVEST event. “We can try some different things and hopefully [see] that it works and then lower the total cost of care, improve patient experience, improve patient outcomes. That’s what we’re trying to do.”

Changing payer landscape

Value-based care payment models are beginning to gain traction with payers, which could attract investor attention. This exploration of bundled and value-based care payments by payers is still relatively new.

“I will say that over the past four or five years since we’ve launched Eleanor, … the move and the ability to administer case rates and bundled payment models by payers in both the Medicaid and commercial space has gone up dramatically,” Petro said. “So early [on], in 2019 2020, there were very, very few payers who could administer a bundled payment model. And so just the fact that there are more that are able to do that, I think, is a good sign for mental health – and for expanding the reach of a lot of these models.”

Petro noted that the Center for Medicare and Medicaid Innovation (CMMI) is also eyeing new innovations.

CMMI announced a goal to have 100% of “original Medicare beneficiaries and the vast majority of Medicaid beneficiaries in accountable care relationships by 2030. The agency has since released a new pilot called the Making Care Primary Model, which is focused on value-based care in primary settings.

CMMI’s focus on value-based care could also help set the stage for more commercial payers to prioritize value-based arrangements. But these arrangements can look many different ways. Investors speculate that models, where providers are sharing in cost-savings, will come to fruition sooner than at-risk models, where the provider could stand to lose.

“People will be reluctant to go at risk. But would they be willing to be compensated on an asymmetrical basis? Or enhanced outcomes? I think the answer to that would be yes,” Hyman said. “I think it’s very hard to say that they’re going to go at risk and enter the sort of two-sided risk at this point. And nor do I think the payers are there yet.”

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