‘I Never Thought of It as A Business’: Closures Reveal Shakiness of the Traditional Eating Disorder Industry

Residential eating disorder treatment facilities are becoming somewhat of an endangered species. Over the last few months, the industry has seen a string of closures.

Patients and payers have increasingly opted for virtual care models, shrinking the pool of patients residential treatment centers could serve in the first place. That pool was small to begin with and unevenly spread across the U.S. These major factors and the several challenges facing the whole of behavioral health make this slice of behavioral health an especially challenging environment to work in.

The latest and most high-profile closure came from Optum-owned Refresh Mental Health, one of the largest behavioral health companies in the nation, shuttering all of its several eating disorder treatment entities.


Late last year, Behavioral Health Business reported that behavioral health platforms Odyssey Behavioral Health and Discovery Behavioral Health, both private equity-backed diversified companies, scaled back their eating disorder treatment locations.

These closures represent some of the challenges of investing in behavioral health generally. Despite apparent explosive growth in demand, the conditions around behavioral health make converting demand into a valuable enterprise extremely difficult. The autism therapy industry also demonstrates this challenge.

Still, industry insiders tell BHB that the eating disorder treatment space will always have a need for the intensive, specialized and expensive services that residential treatment centers provide. Two facets of American culture drive this. On one hand, a slow-rolling generational shift is incrementally leading to more openness about behavioral health issues. At the same time, social media and pop culture still perpetuate potentially harmful images of health and body type.


“You’ve got obviously tremendous societal pressures and weight stigma, and that’s not going away. Obviously, social media has an impact,” Rachel Levi, a longtime clinician and executive in the eating disorder space, told BHB. “Most of our clients are following social media that encourages our diet culture.”

Levi, who was the founder and longtime CEO of Shoreline Center for Eating Disorder Treatment in Long Beach, California, now runs her own private outpatient mental health practice.

The coronavirus pandemic has accelerated or compounded many of these trends. From the demand side, research by Trilliant Health shows that mental health service visits, specifically for eating disorders, were up 90.3% at the end of 2022 compared to the start of 2019. Anxiety disorder and depressive disorder visits were up 39.2% and 24.3%, respectively.

The increases come from a comparatively small historic base. Other research shows that 6.4% of Americans will experience an eating disorder in their lifetime. The one-year prevalence rate for 2019 was 1.66% in the U.S. Compare that to the 19% of Americans who self-reported needing addiction treatment in 2022.

“You don’t have enough people that need especially higher levels of care in every geography,” Dr. Taft Parsons III, chief psychiatric officer at CVS Health, told BHB, adding similar geography issues impact the workforce side of the equation. “It’s hard to get a group of practitioners that have that specialization in the same place as well.”

A mission to treat eating disorders

Even before the present turbulence, the small number of providers in the eating disorder segment meant patients often needed to travel out of their communities to get residential treatment care. This also led to battles between payers and providers over rates (both in- and out-of-network) and conflicting visions of what care quality looks like. This has been true for years.

Yet provider-entrepreneurs felt the calling to start practices and businesses to meet unmet patient needs, knowing and facing the challenge while making investment considerations a secondary priority.

“I’m someone who went into it sort of accidentally and solely did it for the purpose of giving my personal private clients what they needed, which is expanded [care options],” Levi said. “It was always a great, in a sense, business for me.”

As with other segments of behavioral health, investors in the private equity and venture capital spaces took note of the underlying demographics of patients with eating disorder treatment and the relative lack of consolidation and business sophistication.

Levi, who eventually sold Shoreline to Brentwood, Tennessee-based, private equity-backed Odyssey Behavioral Health in a deal announced in January 2021, described big-dollar investors’ entrance into the space as a “gold rush.”

Other clinicians in the space based their work on personal experience with eating disorders. Such was the case with Wendy Oliver-Pyatt, founder and chairman of Galen Mental Health and CEO of Within Health. She is also a psychiatrist.

In the early 2000s, she wrote a book that detailed her recovery and pushed against the conventional wisdom that eating disorders were a permanent and overriding feature of one’s life. The exposure from her book eventually led to her helping to launch her first venture, a residential treatment center company called Center for Hope of the Sierras. That company would eventually be acquired by CRC Health in 2007.

“I got a knock at the door from CRC Health, and they said they would like to buy my business,” Oliver-Pyatt said. “I was like, ‘What business?’ I never thought of it as a business. I was just trying to do the best possible care.”

She would go on to launch and exit Oliver-Pyatt Centers and Clementine Adolescent Treatment programs, now part of the Miami-based eating disorder treatment provider Monte Nido & Affiliates.

“It wasn’t like I said, ‘Eating disorders are a good place to set up,'” Oliver-Pyatt said. “I had a special understanding of eating disorders since I had one and I wrote about preventing them in 2002. … People came to me after they read my book. Sometimes people think I planned this out. No, I didn’t.”

What patients want and need

Levi and Oliver-Pyatt noted the unique challenges of working with patients with eating disorders, requiring highly specialized staff and care protocols. Notably, patient ambivalence is a hallmark of the condition, Levi said.

“If a patient has cancer, they’ll look to the doctor to tell them what they need to do and want to get rid of it,” Levi said. “If you have an eating disorder, there is ambivalence about letting it go. The conversation is sort of like, ‘Well, I want to recover but I just don’t want to gain weight or I want to recover but I just don’t want to go into treatment.'”

“You don’t get that with other health conditions,” she added. “The eating disorder is serving some sort of backwards purpose.”

Further, there’s a significant dispute between providers and over the amount of time patients should be in residential treatment centers. This long-standing conversation is often paralleled with questions about the effectiveness of care that takes people out of their communities and living environments and places them in artificially secure spaces.

“When somebody goes 100 miles away for several weeks, they’re not sitting there with the day-to-day stressors that they are if they’re still in their home,” Parsons said. “They may look better with a lot of staff in a place that doesn’t have the same stressors. Then, when they go back home and they don’t have that staff … they’re right back in it, with the usual stressors.

“What we’ve seen with that population is a lot of relapses and people needing to go back into treatment.”

He also noted that virtual treatment options, an ascendant modality for treating disorders, show promise for reducing relapse and readmittance while allowing people to address care in the same environment they will live in post-treatment.

“And it’s been a customer pleaser,” Parsons added.

Digital eating disorders making a real impact

Virtual behavioral health services have exploded in popularity since the onset of the pandemic. Even after the acute phase of the crisis, behavioral health conditions remain the most common use of telehealth, making up 66% of all telehealth claims tracked by the nonprofit data clearinghouse FAIR Health.

Investors are taking note, too. In 2022 and 2023, the digital eating disorder treatment provider Equip secured a $58 million Series B funding round and a $20 million investment from the VC giant General Catalyst to help it expand its historic pediatric focus to include adult patients.

Lydia Rudy, chief development officer of Eating Recovery Center, notes that the growth of digital services decreases the likely pool of residential treatment center patients while increasing and simplifying access to care.

“As a social worker and clinician, I’m delighted about this. We need [to get] as much care as possible to people as early as possible,” Rudy said. “My concern is that the industry may overrepresent how successful that model is and where the patient is on their journey. With in-person, we can do medical interventions that may be in the patient’s best interest.

“To paint everything with one brush that [virtual care] is enough, I think, is overstated.”

The financial impact on the residential treatment side can’t be overstated, says Brandon Johnson, CEO and co-founder of Very Health, a digital eating disorder treatment provider.

Even with just a few thousand patients no longer seeking residential treatment center care, digital eating disorders treatment providers could take “hundreds of millions of dollars out of the market in a year.”

A 2019 report by the federal government finds that eating disorders are the costliest behavioral health condition to treat. Inpatient care, on average, costs $19,400 and lasts 13.6 days. It was also the least common in the data examined.

“I think eating disorder treatment is going to be more digital because it integrates into people’s lives and it’s cheaper,” Johnson said. “If you’re getting better outcomes for less money, that’s the way the market is going to go.”

A cornerstone argument that virtual eating disorder treatment providers make — Very Health and Equip alike — are improvements in retention and relapse rates. Johnson said his company’s relapse rate is 3.6% for patients that have joined the program.

The need for residential eating disorders will continue

Despite the many forces wearing down the residential treatment center business, all insiders said the increasing rate of eating disorder prevalence and apparent continuous worsening of American mental health cements the need to have these facilities in the market.

“There is increasing demand for some level of specialized treatment. But what there probably isn’t is a huge increase in demand for that residential level of care,” Parsons said. “There’s a difference between needing care from somebody who is very good with eating disorders versus needing to go someplace and stay overnight for multiple weeks in order to get that treatment.”

The underlying potential of starting a business in eating disorders is the same for other segments of behavioral health: high demand and a shortage of services to meet said demand.

“There’s, frankly, a large number of people in our country and in the world who struggle with eating disorders. Because there is a basis for the need for care and it is a complex one … it’s a niche market,” Rudy said. “A niche market within the behavioral health and medical space is a viable business, period. It’s also necessary.”

What’s not clear is how much space companies will have to operate. Several sources who run eating disorder treatments said payer reimbursement rates have remained relatively flat over the course of decades.

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