Shreveport, Louisiana-based Seaside Healthcare has sold off its two major behavioral health divisions. SUN Behavioral Health has purchased its outpatient therapy business. The Graph Group has acquired its acute and intermediate behavioral health care services. 

Seaside Healthcare’s now-previous backer, Pharos Capital Partners, sold the company’s assets in different parts to maximize the clinical offering of each segment and capitalize on a nearly 11-year hold period. 

Red Bank, New Jersey-based SUN Behavioral Health is betting on using the assets to consolidate several types of services into a single organization, serving those with complex behavioral health needs.

“Our thesis is that if we can engage patients who typically only seek care in crisis — and support them through a longer-term recovery — we can improve outcomes and reduce both behavioral and medical readmissions,” Steve Page, president and CEO of SUN Behavioral Health, told Behavioral Health Business. 

SUN Behavioral Health acquired Seaside Healthcare’s multi-state outpatient business, consisting of several home- and community-based services (HCBS) that provide intensive medical and social services for adults and children, typically within the purview of the nonprofit human services segment. Englewood Cliffs, New Jersey-based The Graph Group acquired an inpatient psychiatric facility and affiliated partial hospital program (PHP) facility that also offers housing support in Baton Rouge, Louisiana.

Presently, there is little geographic overlap between the pre-deal SUN Behavioral Health sites of services and the footprint of the Seaside HCBS locations. However, the broad overlap in the payer-patient population, i.e., Medicaid-covered patients with severe needs, is familiar to SUN.

The only existing footprint overlap is in Houston, Texas, where it operates a 148-bed psychiatric hospital. Page said they are already piloting an integration of their acute facility care and HCBS services. SUN Behavioral Health also operates hospitals and connected high-level outpatient programs in Erlanger, Kentucky; Columbus, Ohio; and Georgetown, Delaware.

Seaside Healthcare HCBS’s assets are based in Georgia, Louisiana, North Carolina, South Carolina, Texas, and Virginia.

Page reflects the confidence that many in the industry have that integrating acute and outpatient services as well as other wraparound services like in-home social and clinical services will create win–win-win situations that improve patient health and deliver savings to health plans and providers. However, proving that case is a difficult proposition for most behavioral health care, where services that directly address social determinants of health or otherwise account for them are rarely part of integrated platform companies.

“What we find is we basically are seeing the same patients leave us after having a crisis and then come back to us in crisis and come back to us in crisis again with limited interaction with the health services in between,” Page said. “I think that is because it’s hard. Patients are dealing with a lot; to continue treatment in between episodes of crisis is hard.”

He noted that it has also been hard for behavioral health providers and other organizations that partner with them to engage with people who are frequently treated in facilities outside of them. In part, this is because payments from states or from payers are “modest,” Page said, and difficult to build models around. He also noted that many of these types of services that seek to engage patients are closely tied to payers or other unfamiliar organizations that patients might be skeptical of.

Still, if the model pans out, SUN Behavioral Health will be able to prove out a very popular clinical and investing thesis. It will also give the company the opportunity to backfill Seaside Healthcare’s HCBS markets with de novo SUN hospitals in underbedded markets or acquired facilities where they are available in more developed markets.

“The thesis that it’s important for behavioral health patients to have access to care at the right level of acuity, with the right level of care and oversight while keeping them in the community as much as possible, remains really strong,” Rebecca Springer, director of market development at Bailey & Co., told Behavioral Health Business. “In the case of this specific asset, the two pieces made more sense separately, but I don’t think you see the idea of providing care at a variety of acuity levels going away.”

Bailey & Co. represented Pharos Capital Partners in the transaction. Pharos originally acquired Seaside Healthcare in 2014. At that time, Seaside owned and operated two facilities and operated facilities owned by other entities. 

The fact that Seaside Healthcare was sold in two separate deals was in part enabled by the minimal overlap of patient populations within the company. The two facilities acquired by The Graph Group — the psychiatric hospital and the affiliated PHP — largely served permanently disabled patients with Medicare coverage. The HCBS services acquired by SUN Behavioral Health largely served people with Medicaid. 

Medicare and Medicaid are both safety net health plans for specific populations with different levels of government involved. Medicare is offered by the federal government largely for Americans over 65 or those under that age with specific health conditions. Medicaid is jointly overseen by state and federal governments, with most of the administration handled at the state level. Medicaid is largely for vulnerable populations such as pregnant and postpartum women, children, the disabled and people below certain income levels. 

The deal also signals that the demand for providers that largely focus on serving patients covered by government health plans remains in high demand by investors. That’s because of the persistent need of that population combined with what are not-as-bad-as-anticipated proposed changes to Medicaid. Before the passage of the One Big Beautiful Bill Act, the present policy and budget omnibus bill championed by President Donald Trump, there were worries that the $880 billion reduction to deficit spending previously mandated by Congress would lead to direct funding cuts to Medicaid. Many in the industry feared disastrous ramifications for patients and care providers.

“It is vitally important to this community, and to keep the overall cost of health care down, to treat people holistically: mental health is clearly a large part of that,” Stephen Scott, managing director at Bailey & Co., told BHB. “I think it also speaks to the trend of how people think the demand for this [type of service] will continue despite the noise in Washington.”