Behavioral health is a relatively young industry, which means providers are still hammering out how to produce the most productive long-term relationships with payers and investors.

“There are headwinds in this business,” Daniel Krasner, chief marketing officer at Summit BHC, said at the Behavioral Health Business INVEST event this October in Dallas. “We can’t tell you what they are going to be, but we’ve got to be able to weather the storm.”

Krasner spoke in the context of letting a prospective investor know that providers wrestle with shifting expectations from health insurers and Medicaid, plus deal with a maturing regulatory environment. Some of these issues may be too complex or long-term to fit neatly into an investor’s timeline.

Franklin, Tennessee-based Summit BHC is a diversified behavioral health provider. Founded in 2013 it has grown to operate 12 psychiatric hospitals and 26 SUD treatment centers.

Other industry veterans noted that companies who provide, for example, in-network substance use disorder (SUD) treatment are still very new to the country’s health care economy.

“We’re just in the second inning of nine innings in behavioral health,” Roy Serpa, co-founder and chair of BasePoint Health Management, said at INVEST.

Roy Serpa speaks from the experience of someone who participated in those early innings. He jumped over from home health care to behavioral health in 2013, becoming president and CEO of Lakeview Health, an addiction treatment and rehab program.

In 2019, Roy Serpa founded BasePoint with his son, Blake Serpa. BasePointprovides partial hospitalization (PHPs) and intensive outpatient programs (IOPs) to adolescents diagnosed with mental health disorders.

Payers and investors, be they private equity or venture capital, generally understand the “macro themes” of what it takes to effectively run an outpatient treatment program, Blake Serpa, CEO of BasePoint, said at INVEST. 

Still, many overlook the nuts-and-bolts of coordinating a care plan.

“The logistics of a program where patients go home every day are incredibly challenging,” Blake Serpa said.

For example, Forney, Texas-based BasePoint hired a team of drivers to pick up and drop off patients.

“We provide transportation for our patients,” Roy Serpa explained. “Typically, it’s a meet-up site, and not always picked up at home. Seventy percent of our patients use our transportation.”

Perhaps the biggest practical challenge is communicating with payers.

Krasner said that Summit BHC distinguishes itself by measuring a patient’s progress.

“We’re hyper-focused on outcomes and patient satisfaction,” Krasner said.

However, there is a disconnect between the value-based care that Summit BHC seeks to provide and how health insurance companies or Medicaid programs evaluate operations.

“They haven’t been that interested from what I’ve seen about our outcomes, or learning about what we’re doing to improve our outcomes,” Krasner said.

BasePoint’s leaders have had a similar experience.

“There’s been talk of value-based with payers, but there’s no really deep conversations yet,” Roy Serpa said.

BasePoint’s business model is 100% in-network, Blake Serpa said, which does not include Medicaid, as Texas’s Medicaid program does not reimburse for PHP and IOP.

Blake Serpa repeatedly emphasized that it required “discipline” to negotiate with private insurers. One change in federal law that BasePoint has benefited from, the CEO said, is a three-year-old requirement that insurers publicly disclose rates they negotiated with providers.

“I felt like I was negotiating in a dark room prior to having this data,” Serpa said.

BasePoint has so far not sought private equity ownership. Blake Serpa said that the company would first like to develop its care model further and reach across Texas.

Summit BHC, meanwhile, was purchased by Patient Square Capital in 2021 from Lee Equity Partners for an estimated $1 billion. Krasner said that given the complexities of behavioral health, a better fit might be superior to the most lucrative offer.

“Do they fundamentally understand what we need to do?” Krasner said of potential investors. “You want somebody that’s patient.”