I’ve been the editor for Behavioral Health Business (BHB) for more than three years, and I can firmly attest that M&A and reimbursement trends are the hot topics audiences are most likely to read.
It makes sense; money makes the world go round, and providers must understand how they will get paid.
Still, there are some under-the-radar trends I’ve been watching that could impact the industry, eventually lead to new care structures and even deals.
For starters, I was struck to see new data out of Trilliant Health show that behavioral health visits now eclipse primary care visits for commercially insured patients. This could disrupt the traditional thinking around who is the quarterback of integrated care, and put behavioral health providers in the driver’s seat.
On the investment front, I’ve been closely monitoring the closing of new private equity and venture funds. While these may not be direct behavioral health deals, many of these funds could trigger new deals in the sector in coming years.
And lastly, there have been several CEO shakeups at digital health companies this fall. This isn’t necessarily a bad thing for the virtual care industry; rather, it could indicate the sector’s maturation and the need for CEOs with experience in scaling.
In this BHB+ Update, I will explore:
– Why behavioral health teams could be the new quarterback of integrated care
– Which PE and VC firms are worth watching for more deals
– What new digital health CEOs mean for the industry at large
Move out of the way primary care, I want to see my therapist
Primary care physicians are no longer serving as patients’ entry point into the health care system.
Commercially insured populations now engage more with behavioral health clinicians than they do with their PCP. According to new research by Trilliant Health, behavioral health utilization has increased by 44% since 2018. Meanwhile, primary care use has decreased by 7%.
The nature of the specialties can account for some of this shift in utilization trends: patients generally see a behavioral health specialist several times a year, whereas primary care visits are limited to an annual physical or a specific health concern. Additionally, the Trilliant data didn’t include non-physician clinicians, such as nurse practitioners or physician assistants, working in a primary setting.
Still, these numbers signal a fundamental shift away from the primary care provider’s traditional role as the quarterback of integrated care.
The data raises the question: If more patients are seeing behavioral health specialists regularly, what role could these clinicians play in a collaborative care model?
Some of the more established models of integrated care, such as co-locating behavioral health clinicians in a primary care clinic, may need a shakeup.
It could make sense for behavioral health clinicians who regularly work closely with a patient to take the lead on patient care and collaborations. This is especially true for chronic conditions, such as substance use disorder (SUD) and serious mental illness (SMI).
“At UCSF [University of California, San Francisco], our quarterback is the addiction medicine physician,” Dr. Ayesha Appa, assistant professor of medicine at the University of California, San Francisco, said at the Addiction Treatment Forum in July. “I would say that’s fantastic for innovation in research and treatment. It’s not always by design; it’s by necessity. Sometimes we wish that the quarterback were somebody closer to a care manager who is able to handle multiple cases with physicians.”
On the SMI side, we’re also seeing behavioral providers co-locating physical health clinicians.
For example, Amae is a serious mental illness provider that offers a variety of services at its brick-and-mortar locations, including psychiatrists, social workers, peer support, health coaches and primary care physicians. Psychiatrists ultimately lead the care decisions at the company.
I think we could start to see more models like this in the future, where the mental health team is leading the collaborations.
New funds close
While major platform deals in behavioral health have remained few and far between, there are some hints that private equity and venture backers could be looking to jump back into the game soon.
Earlier this month, private equity firm Shore Capital announced that it closed its sixth Shore Capital Healthcare Partners Fund and second Shore Search Partners Fund with a total of $850 million in capital commitments across the funds.
Shore Capital has been an active investor in the behavioral health sector – and it’s likely that will continue. Its investments include autism providers Behavioral Innovations, Florida Autism Center and The Stepping Stones Group, as well as serious mental illness provider Column Health, addiction provider BrightView and outpatient mental health company Transformation Care Network.
But Shore Capital isn’t the only investor with a fresh funding closure. Northlane Capital Partners closed its third private equity fund with $750 million. Northland is a middle-market private equity fund that invests in lower- and middle-market health care-focused companies.
It has previously made one investment in behavioral health with Empower Community Care.
This service offers training and support to at-risk youth and their caregivers, as well as software-based assessment and case management tools. Northlane sold the company earlier this year to NexPhase Capital.
But private equity aren’t the only investors with fresh capital. Venture capital firm Town Hall Ventures announced a $440 million investment in its fund focused on advanced AI and health care innovation for underserved communities.
Town Hall Ventures has a long history of investing in behavioral health. Its investments include pediatric and collaborative care providers Marble Health and Concert Health, addiction care provider Eleanor Health, urgent care provider Connections Health Solutions, digital mental health provider Foresight, Medicaid-focused provider Brave, and value-based care company Cityblock.
These new raises signal fresh capital for established players and new digital startups as well. Though it’s unlikely we see the dealmaking highs of 2021 and 2022, we could see behavioral health companies get a boost of investment from these players.
The CEO shakeup
This fall we’ve seen half a dozen or so new CEOs announced – with the majority of these shakeups impacting digital behavioral health startups.
In particular, several founders have stepped down from CEO roles. Naomi Allen, co-founder of pediatric behavioral health provider Brightline, and Natalie Schneider, founder of youth-focused digital health company Fort Health, are recent examples.
Still, these transitions may signal a very natural evolution: startup founders excel at building the business from the ground up, while new CEOs bring experience scaling established operations. The transition could indicate that digital health companies are beginning to mature.
Some of these transitions have come at a point of change for businesses.
For example, it’s worth noting that pediatric behavioral health provider Hazel Health announced its new CEO alongside a major acquisition. The company’s co-founder, Josh Golomb, stepped down from the CEO position in May. Recently, the company announced that former Cityblock CEO, Iyah Romm, would take over the role.
This narrative is not true of every new CEO. For example, Groups Recover Together’s new CEO, Cooper Zelnick, has been with the organization since 2018 and moved up within the company.
Regardless, I’d be on the lookout for more C-suite shakeups, particularly in the digital health space, in the next few months.
Companies featured in this article:
Amae, Northlane Capital Partners, Shore Capital, Town Hall Ventures
