While 2023 unfolded at a dizzying pace, significant news in the behavioral health space may have escaped notice.
This brief overview revisits several overlooked stories, offering valuable insights from a year marked by pivotal moments and promising trends.
These overlooked stories represent meaningful developments in crucial industry narratives, serving as hidden gems and emblems of the year’s progress. We now have the benefit of hindsight to truly appreciate them and what they might tell us about the coming year.
LifeStance fights to tame sprawl
LifeStance Health Group (Nasdaq: LFST) started to scale back, breaking from its aggressive M&A growth blitz.
The company is now focused on translating the big spending and losses it incurred to become the largest outpatient mental health provider in the U.S. into profit. The move represented and signaled a new era in behavioral health that demands greater sophistication and maturity.
LifeStance Health has almost stopped acquiring practices altogether, focusing rather on de novo centers to grow. The company exploded in size through private equity-backed M&A. Further, LifeStance Health announced its plans to close over 70 centers by the end of the year. It also had to muddle through several operational headaches, some of which saw progress in 2023.
This trim-the-fat initiative happened in no small part because of its origin. LifeStance Health was founded in 2015 following investment partnerships with Summit Partners and Silversmith Capital Partners to consolidate and expand access to outpatient mental health. The founding team was now-former CEO Micahel Lester, now-former Chief Operations Officer Gwendolyn Booth and now-President Danish Qureshi. It secured a $1.2 billion investment from TPG Capital in 2020 and went public in June 2021.
Leading into the IPO, the company had acquired 53 other practices. At the end of 2022, it had completed 90 acquisitions. The company will now focus on opening new centers.
Behavioral Health BusinessThe coronavirus pandemic led to telehealth’s dominance of certain avenues of behavioral health. LifeStance Health saw 73% of all visits done via telehealth in the third quarter of the year. Mental health diagnoses have been the top reason for telehealth visits in the U.S. since March 2020, according to health claims data nonprofit FAIR Health.
The dozens of acquisitions led to the company untangling “100 phone systems” and “dozens of EHRs,” Qureshi said in LifeStance Health’s second-quarter earnings call. At that point, the company had completed getting all of the company’s clinics on the electronic health record (EHR), phone system and email system.
By the end of the second quarter, the company had succeeded in culling about 30% of its payer contracts that represented an immaterial number of patients. This was an effort to reduce the company’s administrative burden.
Roughly $50 million in legal settlement money will keep LifeStance Health from achieving positive cash flow by the end of the year. Company executives say it will be cash flow positive at some point in 2024, according to a transcript of the company’s third-quarter earnings call.
Today, the company lists 671 locations in 33 states on its website. Those locations employed 6,418 clinicians as of the end of the third quarter.
Muted impact of deals
Deal volumes in 2023 will hit a recent low as a number of headwinds drive down enthusiasm for buying and selling business. That may be why the deals that did get done didn’t make the same splash as they would have in years past.
Pittsburgh-based M&A firm The Braff Group has tracked 116 in the behavioral health space through the third quarter of the year. Based on the rest of the year, an annualized estimate of total deals for 2023 could be about 150. Compare that to a record-setting 251 deals in 2021, an anomalously good year for behavioral health dealmaking.
Behavioral Health Business wants to highlight two deals that were noted but were surprisingly limited in the response they generated.
Behavioral Health Business— The private equity firm Consonance Capital Partners acquired a majority stake in youth-focused behavioral health provider Embark Behavioral Health. The deal wasn’t publicly reported until BHB secured and verified information about the deal. The deal’s equity sale was valued at about $400 million with a multiple range of 12- to 15-times EBITDA, according to sources. The recapitalization has so far supported the company’s continued expansion into outpatient services and helped it fill out its leadership team.
— KKR-backed autism therapy provider BlueSprig Pediatrics acquired Lakewood, Colorado-based Trumpet Behavioral Health. The terms were not announced. It was the biggest tuck-in deal in the autism therapy space in 2023. The move expanded BlueSprig’s footprint by adding 37 locations.
Unlocking the methadone clinic door
The fight over deregulating access to methadone has progressively heated up over the last nine months or so. It could be a touch point in the industry and may be a bipartisan slam dunk in Congress.
Advocates are looking for additional solutions to the worsening drug overdose death crisis. It has been driven by increased use of more deadly opioids such as fentanyl and other illicit substances, such as the headline-grabbing veterinary anesthetic xylazine, colloquially known as tranq.
One has been to loosen the extremely tight regulations around the use of methadone, a well-known and long-prescribed drug used in medication-assisted opioid use disorder (MOUD) treatment. The medication is often required to be dispensed and consumed in the presence of a health care provider. This means that people receiving treatment through methadone must make daily trips to state- and federally regulated clinics called opioid treatment programs (OTP).
Research shows methadone is particularly useful in treating those addicted to fentanyl. BayMark Health Services, based in Lewisville, Texas, operates 117 OTPs in the U.S., making it one of the nation’s largest for-profit OTP providers. It found that larger doses of methadone have increased care retention rates and reduced fentanyl use.
In March, a bipartisan group of legislators introduced the Modernizing Opioid Treatment Access Act to “end the monopoly on this life-saving medicine that only serves to enrich a cartel of for-profit clinics and stigmatize patients.”
The U.S. Senate Health, Education, Labor and Pensions (HELP) Committee passed the bill on Dec. 12.
U.S. Agency for International DevelopmentSeveral organizations have spoken out against the bill. Some include The American Association for the Treatment of Opioid Dependence (AATOD), the National Association for Behavioral Healthcare (NABH) and Program, Not A Pill. The latter is a recently formed single-issue group whose partner organizations include Acadia Healthcare (Nasdaq: ACHC), AATOD, BayMark Health Services, Behavioral Health Group, Carolina Treatment Centers, Crossroads Treatment Centers, New Season and Western Pacific Med Corp.
Acadia Healthcare and BayMark Health Services are among the titans of behavioral health.
Should the bill pass, it would break the monopoly that organizations that operate OTPs have over the use of methadone to treat OUD. Still, the competition would be limited to clinicians who are federally and state-approved to prescribe controlled substances and are board-certified addiction treatment specialists — a vanishingly small number of prescribers.
Further, simply removing regulatory barriers doesn’t always translate to increased medication use across the health care industry. The federal government rolled back regulations on buprenorphine prescribing, and there has not been a massive increase in providers using it in treatment.
While there’s quibbling of details and entanglements with national politics, behavioral health reforms are largely bipartisan and have seen such action over the years. Behavioral health has dedicated legislative groups in both chambers since the establishment of the Senate Mental Health Caucus.
Doubtful clinicians challange reimbursement, care innovation
For all the talk about value-based care, it surprised us that evidence of reticence about a key tool to its realization didn’t spark a wider conversation.
Alma, a large digital outpatient mental health platform, found that 77% of therapists surveyed by Alma think insurance companies will use outcome data as justification to deny access to care, while about half think payers unfairly make inferences about the quality of their care.
At an even more foundational level, only 40% of therapists think clinical assessments are useful in tracking patient progress.
Such clinical assessments and other self-reported data make up the basis for measuring the impact, progress and (later down the line) the value of care provided. It seeks to bring objectivity through numbers to the subjective world of behavioral health.
But who gets access to that data? And, how is it used? There are no clear industry-accepted answers to these very sensitive questions, leaving wide lanes for distrust.
Such is the case in the Resilience Lab unionization effort. In part, many therapists distrusted using an outcomes-based care measurement system. That discontent was aggravated by displeasure by many at management’s rollout of the system. The company’s clinicians voted in favor of unionizing on Feb. 1.
Resilience Lab is one of the few unionized behavioral health providers in the U.S.
Payer ghosting haunts behavioral health industry
A handful of key leaders in the behavioral health space helped give a name to a harmful practice by payers experienced by behavioral health providers. Payer ghosting, like ghosting in dating, happens when a payer seems to disappear and does not communicate with the provider seeking to collect claims. And when there is communication, it’s not usually helpful to resolve provider questions.
This fundamentally differs in form and potential solutions to formal payer actions such as denials, clawbacks, or other actions dictated in a payer contract. If a payer simply does nothing, there’s usually nothing a provider can do short of suing the payer, a difficult prospect for many.
It takes sophistication within a provider’s revenue cycle management to track changes in payer behavior. Such documentation is key to either discussing issues with payers or contemplating legal action to get paid.
Normally, giving voice to significant struggles in the behavioral health industry gets more attention. However, this issue is not new; perhaps the reassessment of the matter felt too much like preaching to the choir.
Watching leviathan: UnitedHealth Group
The behavioral industry has been waiting to see what’s next at UnitedHealth Group (NYSE: UNH) after it acquired Refresh Mental Health in early 2022 from private equity firms.
The deal validated the value of the outpatient mental health space and the invest-to-consolidate-an-industry play. It was also presented as a key strategy in UnitedHealth Group’s consolidation of the health care spectrum into an attempt at a cohesive whole under its gargantuan entity, Optum.
Throughout 2023, the company’s top leadership spoke repeatedly about how mental health, in general, and Refresh Mental Health specifically played into its value-based care strategy. Along those lines, UnitedHealth Group announced it would offer 5 million members in some of its plans free virtual behavioral health coaching through AbleTo. Optum acquired AbleTo in 2020. The company has hinted at behavioral health deals to further its integrated care model as well.
Provided by UnitedHealth GroupThe company also said it saw a spike in behavioral health utilization among health plan members. In the second quarter of the year, this increased cost played a secondary role in a 14% quarter-over-quarter operating income decrease for Optum Health. The spike continued through the third quarter.
Behavioral health continues to be a priority for the company. During its recent investor day conference, the company spelled out where it fits into its plans for the future.
Despite these moves, no single development warranted or attracted all that much attention. In describing the bankruptcy of one of the characters in “The Sun Also Rises,” Ernest Hemingway penned the dialogue, “Gradually, then suddenly.” That’s how development strategies can go sometimes: incremental steps, while piecemeal on their own, can lead to dramatic impacts.
UnitedHealth Group’s relevance, given its size and scope, makes it the silver-backed gorilla of health care, a titanic force that others must note. This is still true for behavioral health after the Refresh Mental Health deal, despite the quieting down of external actions in the space.
But unlike the other sectors of health care that UnitedHealth Group/Optum has bought into, outpatient mental health and other segments of behavioral health are incredibly fragmented within their silos and cut off from the rest of the health care system. There are more than enough pieces for the company to put together if it sees an opportunity to do so.
Companies featured in this article:
BlueSprig Pediatrics, Consonance Capital Partners, Elwyn, Embark Behavioral Health, LifeStance Health, Merakey, Program, Program Not A Pill, Resilience Lab, Trumpet Behavioral Health, U.S. Senate Health Education Labor and Pension Committee, UnitedHealth Group
