Lifestance Closes 82 Clinics, Says No Plans for Near-Term Deals

Lifestance Health Group Inc. (Nasdaq: LFST) will focus inward during 2024 to push toward profitability.

The Scottsdale, Arizona-based outpatient mental health provider will continue to abstain from M&A activity, open fewer de novo clinics and juggle several business optimization efforts, executives said Wednesday on its year-end earnings call.

“We have steadied the ship, but we have not yet come close to optimizing the potential of our business,” Ken Burdick, Lifestance Health CEO, said on the call.


LifeStance Health continues to reduce losses on a net basis and positive earnings figures on an adjusted basis. In 2023, its comprehensive net loss was $187 million, 12% lower than in 2022. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) nearly increased 12% to $59 million for the same period.

The markets responded well to what the company had to say: Lifestance’s share price jumped 38% to $8.68 as of the writing of this article.

The optimization efforts underway at Lifestance Health include adding or improving business tech systems, hiring more support staff for clinics, adjusting its clinic footprint and extracting greater productivity from clinicians.


Last year, Lifestance Health launched a clinic consolidation initiative. Its leadership team previously said it intended to close 70 clinics in 2023. On Wednesday, Lifestance leaders said it closed 82 clinics. It opened 35 new clinics and intends to further slow its de novo growth with plans to open “no more than 20 de novos in 2024,” Danish Qureshi, COO for Lifestance, said during the call.

The company is a hybrid company, offering in-person and telehealth services. However, its business relies heavily on telehealth. In previous quarters, about 73% of its visits were conducted via telehealth.

In the fourth quarter, the company saw 72% of its visits come via telehealth, Monica Prokocki, vice president of finance and investor relations, told Behavioral Health Business after the call. 

“Please note, we are seeing higher demand for new patient in-person visits than the overall telehealth mix would imply, as many new patients like to build an in-person relationship with their clinician, and may then move to the convenience of virtual visits,” Prokocki said.

Lifestance now operates 575 clinics and employs about 9,500 people.

“I would note that in-person continues to be a very important part of our overall hybrid strategy and is a significant differentiator for us versus others that are out there,” Qureshi said. “We continue to believe firmly in the hybrid model and that we have done the large lifts in optimizing our footprints in 2023.”

Despite the clinic closures, Lifestance continues to grow its patient base and clinician workforce. In 2023, net new hires grew its clinician workforce by 18% to 6,645. Patient volume grew to 6.9 million, a 20% year over year increase. The company ties visit growth to clinician headcount growth.

The workforce growth and optimization efforts are expected to turn losses into profits, a long-time struggle for the company. This comes despite rapid revenue growth, which increased 23% to $1.06 billion in 2023.

In part, the challenge includes clinician churn. Lifestance has struggled with retention since its debut as a public company. In the 2021 third-quarter earnings call, its founding CEO Michael Lester said its clinician retention rate slipped to 80%. On Wednesday, Qureshi said the clinician retention rate “continues to be stable.”

However, financial research firm Hindenburg Research released a report that said the company’s retention rate may be far lower. Based on an analysis of the public directory Lifestance Health clinicians, Hindenburg estimates the company’s retention rate is closer to 72%.

“Interviews and lawsuit allegations corroborate the retention issues, with former employees detailing how (i) LifeStance overpromises on compensation (ii) LifeStance institutes a system whereby clinicians end up indebted to the company (iii) LifeStance has a crippling corporate culture with no value-added and (iv) there are almost zero barriers to entry in operating a private practice,” the firm said in a report released at the beginning of the month.

Lifestance has faced several lawsuits since going public. It announced a shareholder lawsuit settlement at the beginning of the year. That settlement included a $50 million payout in the fourth quarter, according to the company. Executives said Wednesday that this hurt the company’s cash flow.

The company also faces a pair of federal lawsuits — one in Florida, the other in Arizona — that allege Lifestance violated wage laws by offering loans in place of wages when clinicians first start at the company.

Another key challenge to Lifestance Health’s push to profitability remains at least partially out of its control: payer rates. The company focuses on in-network arrangements with payers and generates nearly all its revenue from those arrangements. Despite historic increases in inflation, the total revenue per patient visit only increased by 2% to $157.

Inflation and stagnant in-network payer rates have wreaked havoc on several segments of the behavioral health industry, including the autism and eating disorder segments.

These and several other issues lead Hindenburg Research to a grim conclusion.

“LifeStance’s fate seemed sealed from inception—a company going public with an unprofitable business model with insiders already hitting the exit before the overstated reality of LifeStance’s first quarter as a public company made clear how its pre-IPO claims were fantasy,” the report states.

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