Low Reimbursements Threaten Behavioral Health Providers’ Bottom Line

Staffing is no longer the top issue facing behavioral health operators. Providers are now projecting that reimbursement and payment will be the biggest challenge for the industry in 2024.

That’s according to a new Behavioral Health Business Survey, which included responses from 404 professionals who identified as working for organizations providing treatment for behavioral health, mental health and substance use disorders.

Staffing shortages have plagued the behavioral health industry since the COVID-19 pandemic. While these issues are still a major pain point, with 42% of providers saying it’s the top challenge this year, 43% said reimbursement was the most significant.


Comparatively, last year, 53% of respondents said that staffing was the biggest challenge, and 34% said reimbursement was the top concern.

Many operators have pointed out that staffing and reimbursement challenges are interlinked.

“The biggest issue facing [substance use disorder] providers is the continued clash with payers, with the latter ‘winning’ the battle at this point,” Trey Laird, founder and CEO of the Lighthouse, previously told BHB. “This causes lower or flat reimbursement rates, which means that most centers can’t retain staff. This means there is constant turnover at SUD providers and quality of care suffers. You have talented therapists or clinicians across the country who leave facilities and open private practices as quickly as possible.”


The Lighthouse is a Connecticut-based SUD provider. It provides concierge services, sober living, case management and recovery coaching in the tri-state area.

Inside the reimbursement landscape 

More than half of behavioral health professionals said that payer rate cuts and minimal rate increases will be the greatest area of financial strain in 2024. Meanwhile, 27% of respondents said staffing was the most significant financial strain.

Operators have previously projected that payers will demand outcomes and accountability from providers next year.

“Today, most payers are under significant cost of care pressure, in general, and specifically in mental health. They are worried about the economy and employment,” Brian Wheelan, CEO of Transformations Care Network, previously told BHB. “Health care inflation, especially in acute settings, is extreme. They are looking for dollars and they need to reign in bad practices in their new, far-flung networks.”

Transformations Care Network provides a wide range of outpatient mental health services ranging from adult and child psychiatry to ketamine therapy and group therapy.

While value-based care is one of the most anticipated reimbursement trends in the behavioral health industry, many providers are slow to move from the fee-for-service model. More than 37% of respondents said their organization does not use any form of value-based care.

Meanwhile, only 7% of behavioral health professionals reported that value-based care contracts make up more than 50% of their revenue.

“The key is can you build a business with a sustainable reimbursement model because we’re still in a fee-for-service world,” Jon Gordon, a general partner at HC9 Ventures, previously told BHB. “Behavioral health is still too squishy to move to value-based care in a big way. But then again, physical health is really not value-based either. So let’s not beat ourselves up too much.”

HC9 Ventures is an investment firm focused on Seed and Series A investments. Its portfolio includes behavioral health companies Forge Health and PsychHub.

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