There may be more demand than ever for youth behavioral health services, but the segment continues to face financial challenges, making sustainable operations a headache.

Amid rising rates of depression and anxiety among adolescents, providers are navigating high costs associated with care while simultaneously operating through ongoing clinician shortages across the industry.

The growth of telehealth providers in the space helps bridge some accessibility gaps, but reimbursement challenges persist regardless of whether a provider is brick-and-mortar or virtual.

“I think that the fee-for-service model is very challenging and telehealth providers are held at a higher standard,” Dr. Lindsay Henderson, the clinical director at Fort Health, said during Behavioral Health Business’ INVEST conference in October.

Fort Health is a New York City-based virtual provider of pediatric and young adult mental health.

Because of differences in billing codes and the challenge of shifting most labor to after school hours when serving youth, reimbursement can vary greatly depending on length of visit.

“The difference between a 90837, which is 53 minutes or more, and a 90834, which is 38 to 52 minutes, is a 30% reimbursement difference,” Henderson said. “So I have someone who’s running a little bit behind and gets off the bus or and they’re four minutes late, and all of a sudden our reimbursement, our revenue, goes down greatly and that can make operations hard.”

Cuts to Medicaid from the One Big Beautiful Bill Act also target their patient population and have created uncertainty, since Medicaid is the largest provider of mental health services for children in the U.S.

“It’s been very, very hard to make a fee-for-service business model work,” Chris Johnson, CEO of Bluebird Kids Health, said during INVEST. “And as the primary care provider, we’ve found it very important to find referral workers. We’ve actually had to move in-house a lot of behavioral health capabilities in order to meet the demand. We think about behavioral health as being, especially for a Medicaid population, a preventer of much more costly downstream interventions.”

Bluebird Kids Health is a Florida-based pediatric care provider that offers integrated physical and mental health services both in person and virtually.

Johnson also noted that when providers choose to only accept commercial insurance, they are leaving half of the eligible patient population who benefit from Medicaid and could use their services on the table.

Particularly as some commercial insurance premiums continue to climb, mental health care may become even more out of reach.

“It’s a risk for us to lose sight of the fact that commercial health coverage and high deductible plans mean you’re just paying cash for your services,” Henderson said. “That is a limitation for most families across America. What’s terrifying me right now is what we’re going to see coming down the pipe for what commercial coverage is going to cost the average family.”

As high costs of mental health interventions and reimbursement rates present challenges for youth mental health providers, the path forward needs to focus on integrating mental health care into primary care, using technology and AI to support – but not replace – human clinicians and creating models that truly follow children across different life stages, Henderson and Johnson agreed.

This is especially critical, Chris Dooney, vice president of finance and development at BrentCare Behavioral Health, said, because “the industry is extremely fragmented right now.”

“Most of this space is siloed,” Dooney said during INVEST. “There’s a lot of opportunity for consolidation in this space.”

Johnson echoed that, adding that if innovation and true collaborative care are to continue in a sector that is facing staffing, financial and policy burdens, technology will be key.

“One of the challenges with our current model is there are not enough humans to do all of the work,” Johnson said. “We cover this across a lot in health care about behavioral health, especially in the therapy area. So I think we are going to see some pretty controversial technologies come through.”

Not everyone youth mental health services may agree on the use of AI or certain technologies in the space, but Henderson said what is essential is to think about it critically.

These tools can also be used as a way to upskill and train therapists and clinicians, but incorporating these tools as clinicians who treat youth populations requires discernment about what to use and how is vital.

“Health should always involve humans, and we should use AI to enhance the actual human care delivery and not replace it,” Henderson said. “We have to think critically about how we can use the technology. We’re not interested in replacing the people who parents want to talk to, we are just learning about the options. I don’t want to say that we’re not interested in tech and AI, but I think that youth, in particular, there is a very different conversation and appetite for it than in some of the adult programs.”