Behavioral Health

Behavioral Health
Why a more integrated approach is needed to address and care for some of
the most costly, highest risk patients in the U.S. healthcare system.
Q1 / 2014
Industry Perspective
UNCOMMON CLARITY
1
TripleTree is an independent merchant bank focused on mergers and acquisitions,
financial restructuring, and principal investing services. Since 1997, the firm has advised
and invested in some of the most innovative, high-growth businesses in healthcare. We are continuously engaged with decision makers across the sector including
best-in-class companies balancing competitive realities with shareholder objectives,
global companies seeking growth platforms, and financial sponsors assessing
innovative investments or first mover opportunities.
2
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Q1
Table of Contents
INDUSTRY PERSPECTIVE
2
/
EXECUTIVE INTRODUCTION
4
/
The Evolution of the Behavioral Health Market
9
/
Categorizing a Myriad of Conditions
11
/
Mental Illness and Substance Abuse Impact an exceptionally large population
21
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Care Delivery Settings for Behavioral Health
23
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Alternative Delivery Models
25
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funding sources
26
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The Convergence of Mental and Physical Health
30
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looking ahead
31
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appendix – SELEcT BEHAVIORAL HEALTH M&A TRANSACTIONS
executive INTRODUCTION
Over the past decade, behavioral health has emerged as one of
treatment and when combined with the uninsured, a significant
the fastest growing sectors in healthcare. National expenditures
portion of our population has been underserved, leaving them
on mental health and substance abuse treatment are projected to
vulnerable to high costs and potentially life-threatening disorders.
reach $239 billion by 2014, a compound annual growth rate of over
6% since 2003.1 The prevalence of behavioral health disorders
More recently, behavioral health has been thrust into the national
is staggering and more common than most understand, with
healthcare spotlight. School shootings and other recent tragedies
approximately 26% of Americans aged 18 and older suffering from a
have intensified our country’s awareness of the harmful and costly
diagnosable mental disorder.2 However, the more shocking metric
consequences of those who go untreated. At the same time, the
is that less than half of these individuals receive proper treatment.3
long-standing stigma associated with mental health disorders
Access to healthcare has been a challenge for our country for some
is slowly dissipating and more individuals across the spectrum
time, and access to high-quality behavioral healthcare is clearly no
of diagnoses are actively seeking treatment. From a regulatory
exception. Historically, behavioral healthcare has been available to
perspective, access to care is poised to drastically improve as 30+
more affluent families who could afford to pay out-of-pocket and
million Americans across the Medicaid and individual markets enter
by individuals subsidized by various government programs (e.g.
the system and other favorable regulations requiring coverage for
federal, state and local). Many traditional health insurance programs
behavioral health take hold.
have historically lacked adequate coverage for behavioral health
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Today, the behavioral healthcare market sits at an important
Given these rapidly evolving market dynamics, TripleTree believes the
inflection point. While the demand for mental health and substance
behavioral health market represents a highly compelling investment
abuse services is reaching unprecedented highs, the supply of
opportunity for both strategic and private equity investors. This
services/providers across the behavioral health continuum is neither
report will outline TripleTree’s views of the behavioral health
sufficient nor optimally aligned with the broader care continuum to
landscape, including patient populations, delivery models, and funding
drive improved outcomes at lower costs. The behavioral healthcare
sources; and will evaluate the critical need for integrated delivery
landscape has evolved into a fragmented and often chaotic web of
models that address the entire individual rather than a specific, stand-
providers and delivery models that take a myopic view of treating
alone condition. The report will also provide an overview of recent
specific conditions rather than a holistic view of the individual, who
transaction activity and trends that support our observations of this
frequently suffers from several comorbid physical and mental
large, growing and underserved market.
health conditions.
INDUSTRY PERSPECTIVE Q1 / 2014
3
The Evolution of the Behavioral Health Market
In the 1950s, the behavioral health market was simple and focused on a
• Late 1960s to Early 1970s – For-profit operators recognized the
small number of severely ill patients. Mental healthcare was considered
growing demand for behavioral health services and aggressively
the responsibility of the states and was provided by either state
invested in the opportunity. Community Psychiatric Centers
mental hospitals or in private sanatoriums. Over the past 60 years, the
and Charter Medical Corporation went public in 1969 and 1971,
behavioral health market has transformed into a chaotic web of patient
respectively, and employer-sponsored health benefits began to
populations, diagnoses, care delivery settings and funding sources. A
improve coverage for behavioral health
number of different factors have contributed to this transformation, and
• 1980s – Utilization continued to accelerate as the public perception
range from societal and governmental support to new funding sources
of mental healthcare started to become de-stigmatized. The
and innovative care settings. The following timeline highlights the
relaxation of Certificate of Need in certain states was a catalyst
evolution of the behavioral health market over the past six decades:4
for new facility development and the behavioral health market
continued to expand
• 1950 – Congress passed Title XIV, denying federal funding for
services delivered in an Institute for Mental Diseases (IMD) setting
• 1955 – An estimated 559,000 individuals were being treated in
psychiatric hospitals or IMDs
• 1963 – Community Mental Health Centers Act (CMHCA) was passed
by Congress, shifting funding from state to the federal government
and discouraging the use of traditional institutional-based
care settings
• 1965 – The creation of Medicaid and Medicare provided further
financial incentive to discharge patients from inpatient settings
to community-based settings such as nursing homes, community
mental health centers and short-term general acute settings
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• Late 1980s – Clinical investigations and shareholder and patient
lawsuits plagued the industry. Additionally, reimbursement
pressures began to take hold and significant alterations to the
terms of the mental health benefit were implemented based on
case management and utilization reviews performed by commercial
payers and managed care organizations
• 1990s – Utilization reviews led to the increased use of new drug
therapies and outpatient settings. As a result, lengths of stays,
occupancy levels and pricing for inpatient services experienced a
dramatic decline
• 2008 – The Mental Health Parity and Addiction Equity Act
(MHPAEA) was passed and placed into effect in January 2010,
requiring health plans to provide coverage for mental health
treatment at all, and nearly 90% are not receiving adequate treatment.5
services on par with conventional medical health services and
A primary driver for this is the fact that health insurance coverage for
forbidding employers and insurance companies from placing greater
behavioral health conditions traditionally lagged significantly behind
restrictions on mental healthcare compared to other conditions
benefits for physical conditions. Secondly, and equally important, is
• 2010 – The Patient Protection and Affordable Care Act incorporated
mental health benefits into Essential Health Benefits
• Today – Fewer than 90,000 individuals are treated in public
hospitals, psychiatric hospitals or IMDs. A much broader spectrum of
the substantial shortage of providers and facilities formally providing
behavioral health care. The combination of these two factors created
a situation where the majority of individuals did not have access to
needed care, even if they sought it out.
mental health illnesses are treated through a wide range of
delivery settings
historically, two groups of people have had adequate access to
behavioral healthcare, and this has shaped much of how the care
As our society increases its awareness and recognizes the need for
delivery system has evolved. The first is the wealthy, who could afford
treatment of behavioral health conditions, longstanding stigmas are
to pay out-of-pocket for care and not rely on health insurance. This
generally breaking down, making it more acceptable for individuals
led to the segment of providers that are primarily paid directly by the
to publicly discuss their conditions, pursue treatment, and seek
patient and do not accept insurance (private pay). Some of the leading
the support of family and friends. One of the best examples of this
and most prestigious substance abuse and addiction treatment
evolution is in the veteran community. Veterans of World War II or
facilities employ this model.
Vietnam were reluctant to discuss behavioral health conditions, much
less seek treatment, when returning from war. Now, through proactive
On the other end of the spectrum, Medicaid beneficiaries have had
education of military personnel during service and upon discharge,
access to behavioral health services through state Medicaid benefits.
veterans of the more recent conflicts are seeking care for conditions
Medicaid beneficiaries have a high prevalence of mental illness and the
such as post-traumatic stress disorder (PTSD) in record numbers.
program’s eligibility criteria and comprehensive coverage allow it to
address the extensive needs of the indigent population in the U.S.
While the stigma is slowly dissipating, it is estimated that the majority
Despite high quality coverage, however, Medicaid beneficiaries as a
of people suffering from a behavioral health disorder are not receiving
group are a highly complex healthcare population to manage.
INDUSTRY PERSPECTIVE Q1 / 2014
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Amid growing societal acceptance of those with behavioral health
sponsored plans for orgnaizations with more than 50 employees,
conditions, and thus increasing willingness for people to seek care,
Medicaid managed care programs, State Children’s Health Insurance
the U.S. government has enacted legislation over the past five years
Plan (SCHIP), and group health plans.
expanding health insurance coverage related to mental health. The
Mental Health Parity Law (formally known as the Paul Wellstone and
The health reform legislation in 2010 further expanded access to
Pete Domenici Mental Health Parity and Addiction Equity Act), was
behavioral health coverage to people seeking care. The Affordable
signed into law in 2008 and requires health plans with mental health
Care Act includes behavioral health treatment services as an essential
and addiction benefits to provide equal coverage for both physical and
health benefit, and therefore must be covered by all individual and
mental conditions. While the law does not require health plans to offer
small group plans starting in 2014. This includes plans offered both
behavioral health benefits, it closed many former loopholes which
within and outside of public health insurance exchanges. All plans
allowed health plans to provide very limited coverage for behavioral
offered through public exchanges are required to provide equivalent
health that paled in comparison to benefits offered for physical
coverage for mental health and addiction treatment as is offered for
conditions. Plans that fall under mental health parity include employer-
physical health benefits.
Figure 1
Coverage of Behavioral
Health Services
Increased Coverage with
Mental Health Parity and Health Reform
Low Income Population
• Moderate access via state
Medicaid benefits
Middle Income Population
• Limited access to behavioral health
services via health plans
distribution of wealth across the u.s.
Source: TripleTree
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High Income Population
• Broad access to
behavioral health services
• Ability to pay outof-pocket for highly
specialized services not
accepting health plans
Now that coverage is expanding and people are becoming more
comfortable seeking out care, the question is whether the healthcare
system is adequately prepared to handle increased demand.
General consensus is that many parts of the behavioral health
delivery system are already overwhelmed. For example, coverage
expansion, especially expansion of Medicaid as part of health
In the past two years, Magellan Health Services has
launched two initiatives to manage some of the most
complex patients in state programs.
• First, in March of 2012, Magellan announced a joint
reform legislation, will put tremendous pressure on state and locally
venture with Fallon Community Health Plan to manage
sponsored behavioral health services. Already greatly challenged
the Medicare and Medicaid dual eligible population,
to deliver service for the current patient population under tight
ages 21-64, in Massachusetts. This integrated care
Medicaid reimbursement levels, these organizations are about to
organization will manage care for both the physical
see Medicaid rolls in some states increase dramatically. With most
and mental health needs of the under-65 dual eligible
care delivered by non-profit community mental health centers with a
mission to serve anyone in need, it will be interesting to see if these
organizations can successfully accommodate the increased case
population as part of a demonstration program offered
by the Centers for Medicare & Medicaid’s Federal
Coordinated Health Care Office.
• Then in May 2013, Magellan launched a new Medicaid
load while leveraging more scale to build infrastructure that could
HMO in Florida specializing in members with Serious
increase efficiency.
Mental Illness (SMI). The HMO will manage and
The challenge of accommodating more patients is happening at
a time when many states are moving away from fee-for-service
reimbursement in favor of case rate funding, which creates other
coordinate all physical and behavioral healthcare for
its members and will leverage Magellan’s behavioral
health, radiology and pharmaceutical benefits
management capabilities.
challenges for these organizations. The challenges are amplified as
the cases they handle are often highly complex.
INDUSTRY PERSPECTIVE Q1 / 2014
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Today, the provider market is highly fragmented and there are limited players of scale that have the infrastructure to adequately accommodate
the increased load. To help bring order to today’s highly fragmented market, the chart below (Figure 2) represents TripleTree’s view of the
current behavioral health market landscape. As illustrated, the behavioral health market has evolved into a chaotic and poorly integrated web
of providers looking to address a growing set of disorders that present themselves across a broad set of patient demographics.
Figure 2
Behavioral Health
Adolescents
Children
Adults
Seniors
Mental Health Issues & Disorders
•
•
•
•
•
•
•
•
Anxiety
Bipolar Disorder
Schizophrenia
Child Abuse
& Neglect
Post-Traumatic
Stress Disorder
Sexual Trauma
Violence
Depression
Active Duty
Military
Employees
Eating Disorders
•
•
•
•
Grief
Autism
Personality Disorder
Attention-DeficitHyperactivity Disorder
• OCD
• Alzheimer’s /
Dementia
•
•
•
•
•
Veterans
Substance Abuse & Addiction
•
•
•
•
•
Anorexia Nervosa
Bulimia Nervosa
Binge Eating Disorder
Other Specified Eating Disorders
Unspecified Eating Disorder
Gambling
Alcoholism
Injection Drug Use
Smoking
Binge Drinking
•
•
•
•
Overdose
Polydrug Use
Underage Drinking
Personality Disorder
Delivery Settings Across the Continuum of Care
Acute
Inpatient
General
Hospitals
Correctional
Facilities
Skilled
Nursing
Facilities
Residential
Treatment
Outpatient /
Community
Base
Home
Schools
Funding Sources
Medicaid
Source: TripleTree
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Medicare
Other Federal
Sources
Other State &
Local Sources
Private
Insurance
Out-Of-Pocket
Other Private
Categorizing a Myriad of Conditions
Since the 1950s, the spectrum of treated behavioral health issues
has expanded significantly. In fact, there are roughly 300 different
psychiatric disorders listed in the recently released fifth edition of
Figure 3
Percent of U.S. Population Experiencing
a Behavioral Health Disorder During Their Lifetimes
the Diagnostic and Statistical Manual of Mental Disorders (DSM5). The prevalence of the disorders has not changed meaningfully
over time, but the breadth of services targeting various disorders
has expanded significantly. While Figure 3 lists just five distinct
and very common categories, it is important to note that many
disorders co-occur, and a significant portion of the population
suffers from multiple mental health disorders. According to the
Centers for Disease Control (CDC), 27.7% of the U.S. population
29%
Anxiety Disorder
21%
Mood Disorder
15%
Substance Abuse Disorder
9%
Personality Disorder
8%
Attention Deficit Disorder
0%
5%
10%
15%
20%
25%
30%
35%
suffers from two or more mental health disorders and 17.3%
suffers from three or more disorders.
Source: National Institute of Mental Health
Mental health and substance abuse disorders rarely stand alone
and individuals with a mental health or substance abuse disorder
frequently have co-occurring physical health conditions as well.
These individuals, correspondingly, experience higher healthcare
a person with a chronic disease without depression. Regarding
costs and higher rates of hospital admissions and readmissions.
readmissions rates, a Canadian study found that 37% of patients
According to a recent study by the Robert Wood Johnson
with mental illness discharged from a hospital were readmitted
Foundation, monthly healthcare expenditures for an individual
within a year, compared to only 27% of patients discharged
with a chronic disease and depression are $560 more than for
without a mental illness.
INDUSTRY PERSPECTIVE Q1 / 2014
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Figure 5
Figure 4
Frequency of Co-Occurring Conditions for Adults
with Mental Health Conditions
Treatment Costs for Those with Chronic Conditions
and a Mental Health Disorder
Adults with Mental
Health Conditions
$1,600
$1,420
$1,290
$1,200
Adults with
Medical Conditions
29% of Adults with Medical
Conditions also have
Mental Health Conditions
$840
$860
$800
$400
$130
$20
$0
68% of Adults with Mental
Health Conditions also
have Medical Conditions
Source: American Hospital Association, January 2012
Mental Health
Expenditures
Medical
Expenditures
Without Depression
Total Expenditures
With Depression
Source: American Hospital Association, January 2012
The statistics presented in Figures 4 and 5 and the aforementioned examples highlight the importance and pressing need for a more integrated
approach to care delivery and coordination throughout the care delivery continuum for the growing population of individuals with mental and
physical health conditions present.
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Mental Illness and Substance Abuse Impact an
Exceptionally Broad Population
Mental illness and substance abuse impact people of all ages and
socioeconomic backgrounds. Common examples include children with
The National Survey on Drug Use and Health (NSDUH)
behavioral difficulties, adolescents with eating disorders, adults with
defines a Serious Mental Illness as follows:
substance abuse and addiction problems, seniors with dementia, prison
and jail inmates with a broad range of mental disorders, and active duty
• A mental, behavioral or emotional disorder (excluding
developmental and substance use disorders)
military personnel or veterans with post-traumatic stress disorder.
• Diagnosable currently or within the past year
approximately 26% of Americans aged 18 and older suffers from a
• Of sufficient duration to meet diagnostic criteria
specified within the fourth edition of the Diagnostic and
Statistical Manual of Mental Disorders (DSM-4)6
diagnosable mental disorder, and roughly 20% of children and adolescents
• Resulting in serious functional impairment, which
According to the National Institute of Mental Health, in any given year
have a mental disorder. While mental disorders are widespread across the
substantially interferes with or limits one or more major
U.S. population, the main burden of illness is concentrated among roughly
life activities
6% of the population, who suffer from a serious debilitating mental illness.
Figure 6
50%
Prevalence of Any Disorder Among Adults
46.4%
Average Age of Onset: 14 Years Old
40%
30%
26.2%
20%
10%
0%
5.8%
Lifetime
Prevalence
12-Month
Prevalence
12-Month Prevalence
Classified as Severe
Source: National Institute of Mental Health
INDUSTRY PERSPECTIVE Q1 / 2014
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To highlight some of the more dominant trends and market dynamics, we identified a handful of populations, described common disorders
impacting them, and provided examples of companies that are addressing these populations and some of their disorders.
Population: Medicaid – With recent economic challenges and the implementation of the Affordable Care Act, Medicaid enrollment has been
steadily increasing and will continue to grow. About 35%7 of the population that qualifies for Medicaid and almost half of the 9 million people
who qualify for Medicaid on the basis of disability suffer from mental illness.8 States often outsource the management of these populations
to companies such as APS Healthcare, Beacon Health Strategies, Magellan Health, and ValueOptions. Frequently, care is delivered through
a network of community mental health centers, typically non-profits, that specialize in care for beneficiaries of government sponsored health
and human service programs. In addition to behavioral health treatment, Medicaid often funds additional services such as family support,
transportation, in-home assistance, respite care, and ongoing case management.9
Condition in Focus: Substance Abuse and Addiction – Spending
•
Increased risk of impulsive and violent acts
on substance abuse treatment is expected to exceed $35 billion
•
More likely to attempt suicide and to die from
by 2014, but this may underestimate actual spending given the
frequent commingling of mental health and substance abuse
treatment.10 The co-occurrence of a serious mental illness with
substance dependence or abuse (dual diagnosis) is especially
common. According to the Substance Abuse and Mental Health
Service Administration (SAMHSA), approximately 8.9 million
individuals have co-occurring mental health and substance abuse
disorders, and only 7.4% receive treatment for both conditions
with 55.8% receiving no treatment at all. As a result, these
dual diagnosis patients are a clinically complex and high-cost
population. Common characteristics of dual diagnosis patients
include:
12
•
Less likely to adhere to medication regimens
•
Higher readmission rates
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suicide attempts
Dual diagnosis patients traditionally receive treatment for their
two disorders from two different sets of clinics. As a result,
these services are often fragmented and uncoordinated, and
thus not optimized for the needs of each patient. To improve
care, a growing number of providers are utilizing integrated
care delivery models to address co-occurring mental health and
substance abuse disorders in a more coordinated manner. Within
an integrated care model, professionals with various specialties
work together in one setting, interventions are bundled together,
and the patient receives consistent treatment with no division
between mental health or substance abuse services.
One company taking a leading role in the dual diagnosis
market is Meridian Behavioral Health (Meridian), a
high-growth provider of substance abuse treatment
services through six residential treatment centers, 10
outpatient centers and a single medicated assisted
treatment facility in Minnesota. Meridian specializes in
treating individuals with co-occurring mental health and
substance abuse disorders by utilizing a holistic, patientcentered approach while embracing evidence-based
Founded in 1999, Pyramid Healthcare, offers treatment
and care to individuals suffering from alcohol or other
drug addiction, including a full continuum of adult and
adolescent drug and alcohol rehabilitation programs,
methadone maintenance programs, therapeutic
group homes and alternative schools. Pyramid
currently operates over 30 treatment locations across
Pennsylvania, New Jersey and North Carolina.
best practices. Today, Meridian primarily serves patients
eligible for services under Minnesota’s Consolidated
Chemical Dependency Treatment Fund (CCDTF), which
is the primary fee-for-service payment mechanism for
chemical dependency treatment services for individuals
eligible to have treatment paid for by public dollars.
INDUSTRY PERSPECTIVE Q1 / 2014
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Population: Seniors – Seniors have wide-ranging mental and
Undoubtedly there is a large and growing opportunity to provide
physical care needs. Until the passage of the Omnibus Budget and
behavioral health services to the senior population residing in long-
Reconciliation Act (OBRA) in 1987, elderly patients were required
term care facilities. VeriCare, a pioneer in this specific market, is
to pay out-pocket for needed psychological services. OBRA set in
the largest national provider of behavioral health services to elderly
motion the provision of geriatric psychology and geriatric psychiatry
patients in long-term, residential care facilities in the U.S. Through
services to residents in long-term care communities. Mental health
a community of licensed psychologists, psychiatrists, clinical social
in the senior population certainly shares many of the broader supply/
workers and advance practice nurses, VeriCare provides multi-
demand and prevalence themes highlighted throughout this report:
disciplinary treatments services to residents in over 1,000 facilities
•
Approximately 20% of adults ages 55 and over suffer from a
mental disorder, the most common being anxiety disorders
across California, Texas, New Jersey, Florida, Indiana, Delaware,
Tennessee, and North Carolina.
(e.g. generalized anxiety disorder and panic disorders), severe
cognitive impairment (e.g. Alzheimer’s disease), and mood
Formed by combining with adult day care provider
disorders (e.g. depression and bipolar disorder).11 In 2005,
Senior Care, Active Day operates over 79 adult day
nearly half of nursing home residents had dementia, and 20%
had other psychological diagnoses.12
•
Less than 3% of older adults see a mental health professional for
their mental health problems.13
•
patients per day. The care centers provide a daytime
program of nursing care, social services, meals and
recreational activities to frail, elderly and disabled adults
with chronic conditions such as Alzheimer’s disease,
congestive heart failure, dementia, developmental and
There is an insufficient supply of trained professionals available
intellectual disabilities, and other physical and mental
to provide behavioral health services to older adults. This supply
illnesses. As a cost effective alternative to in-home
and demand imbalance will exacerbate as the aging population
and nursing home care, adult day services fill a growing
grows and the demand for specialized mental and behavioral health
services increases.
14
health centers in 11 states, serving more than 3,600
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need to provide healthcare to an aging population while
allowing patients to maintain their independence.
Condition in Focus: Dementia – A recent study conducted by the RAND Corporation set off a few red flags about the
escalating cost of dementia within the U.S. healthcare system. According to RAND, dementia is one of the country’s most
expensive medical conditions, costing the U.S. between $157 billion and $215 billion a year in medical care and other costs.
Compared to other common costly diseases, the direct medical costs of treating dementia, estimated at $109 billion in 2010,
are in line with heart disease ($102 billion) and substantially greater than cancer ($72 billion). Beyond direct medical costs,
it is estimated that an additional $48 billion to $106 billion is spent on informal care for dementia, which primarily includes
lost wages and care provided by family members at home. The projected growth is also eye opening: both the costs and the
number of people with dementia will more than double within 30 years, a rate that overshadows many other chronic diseases.
These staggering statistics clearly reinforce the need for the U.S. to find better solutions for those suffering from dementia.
Figure 7
Prevalence of Dementia by
Age Group
Costs of Care
(in Billions)
37%
40%
$300
$259
$250
30%
24%
$183
$200
20%
$150
10%
5%
$100
0%
71 - 79
$129
$109
80 - 89
90 and Over
$50
2010
2020
2030
2040
Source: The New England Journal of Medicine
INDUSTRY PERSPECTIVE Q1 / 2014
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Population: Veterans –The influx of U.S. soldiers returning from
Iraq and Afghanistan will result in a growing percentage of veterans
Companies like valor healthcare (a subsidiary of
with serious mental and substance abuse disorders including
humana), Crassociates, and Sterling Medical
schizophrenia, bipolar I disorder, post-traumatic stress disorder
Corporation, which provide primary care and mental
(PTSD) and depression. Since 2001, more than 2.2 million U.S.
veterans have served in Afghanistan (Operation Enduring Freedom,
“OEF”) or Iraq (Operation Iraqi Freedom, “OIF”). The prevalence of
behavioral health disorder amongst our veterans is staggering:14
•
More than 11% of OEF and OIF veterans have been diagnosed with
a substance use disorder – an alcohol use disorder, a drug use
disorder, or both
•
Between 36.9% and 50.2% of OEF and OIF veterans in the
Veteran’s Administration (VA) healthcare system have received a
mental disorder diagnosis, such as PTSD
or depression
•
Nearly 22% of OEF and OIF veterans with post-traumatic stress
disorder also have a substance use disorder
16
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health services through community-based outpatient
clinics (CBOCs), will undoubtedly experience a
growing demand for high-quality care as our veterans
return home and seek treatment for a range of mental
and physical disabilities in the aftermath of war.
Population: Correctional Inmates – Each year, 9 million adults
in Illinois; Los Angeles County; and New York City) manage a volume
circulate through jails and over 750,000 adults are released or
of behavioral patients that equates to 28% of all beds in the nation’s
paroled from federal and state prisons. Numerous studies have
213 state psychiatric hospitals. More specifically, New York City’s
shown that the correctional population has a higher prevalence
total prison population has fallen to 11,500, down from 13,576 in 2005.
of various health problems, such as substance abuse, infectious
However, the percentage of mentally ill prisoners grew from 24%
disease, mental health disorders, chronic disease, and reproductive
to 27% over the same time period. Mental illness in the correctional
and sexual health problems, as compared to the general population.
care market is estimated to cost the nation $9 billion annually, and
As illustrated in Figure 8, 45% to 65% of inmates across correctional
upon release many inmates struggle to find adequate mental health
settings suffer from a mental health disorder.
resources and often fall back into the correctional system as a result
As the behavioral health industry has moved away from being
dominated by inpatient mental institutions, prisons and jails have
taken on much of the consequential burden of providing mental health
services. Since the 1950s, a third of state psychiatric hospitals have
closed, leaving the afflicted with few alternatives. To put this shift in
perspective, the country’s three largest jail systems (Cook County,
– the highest recidivism rates are among mentally ill inmates.15 With
healthcare and behavioral health consuming a greater portion of
correctional agency budgets, governments at all levels have turned to
outsourcing correctional healthcare to companies like Centurion (a
joint venture between Centene and MHM Services Inc.), Correct Care
Solutions, Corizon and Wexford Health Sources to serve this large,
growing and costly patient population.
Figure 8
Annual Diagnosable Mental Health Disorders Among Inmate Populations
80%
60%
64%
56%
45%
40%
20%
0%
State Prison
Federal Prison
Local Jail
Source: National Institute of Mental Health
INDUSTRY PERSPECTIVE Q1 / 2014
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Population: Commercially Insured – Often unable to afford the
Employer-sponsored plans are rapidly evolving with some
services of self-pay focused providers, the commercially insured
employers materially changing the financial structure of their
population has been forced to make do with what it could afford or
health plans, considering narrow network approaches, or moving
was covered by health insurance. Barriers to adequate treatment
to defined contribution health benefits, if not dropping coverage
for the commercial population can be generally attributable to
altogether for all or segments of their work forces.
plan designs with limited coverage, caps on lengths of stay or the
number of provider visits, and significant copays. Mental health
parity legislation and increased awareness by employers of the
importance of covering behavioral health services is expanding care
opportunities for this population.
The commercially insured population is highly diverse as segmented
by type of healthcare coverage and socio-economic status. Changes
occurring due to health reform are significantly impacting this
population and the behavioral health providers serving it.
•
On November 14, 2013 the Department of Health and Human Services,
Labor and the Treasury jointly issued a ruling to finalize the Paul
Wellstone and Pete Domenici Mental Health Parity and Addiction
Equity Act. The act ensures that health plan features like co-pays,
deductibles and visit limits for mental health and substance abuse
disorders are comparable to those for medical health issues.
•
The Affordable Care Act further builds on the expansion of
mental health coverage through the inclusion of mental health and
substance abuse disorder services as one of the ten essential
health benefit categories.
18
•
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•
The individual market is being thrust into public health insurance
exchanges. While benefitting from the inability of carriers to deny
coverage for pre-existing conditions and new insurance options,
consumers are facing changes to their coverage and new provider
networks to navigate.
Like many other implications of health reform, the ultimate outcome
from these dramatic changes is not entirely clear. However, the
regulatory and structural changes are taking a big step in the
right direction and will begin to break down historical barriers to
behavioral health coverage for millions of Americans.
Condition in Focus: Eating Disorders – As behavioral health is gaining awareness and momentum as a disease state in the
U.S., eating disorders are still largely considered a niche industry in an early phase of development. Twenty-four million
people of all ages and genders in the U.S. are affected by eating disorders, primarily including anorexia, bulimia and binge
eating.16 Eating disorders:
•
Affect 6% of adult females, 3% of adult males, 7% of adolescent females and 4% of adolescent males17
•
Indiscriminately impact all ages, races, socioeconomic classes, gender and weight
Despite these staggering numbers, only one in ten affected with an eating disorder receives treatment. An eating disorder
rarely stands alone. Roughly 50% of eating disorder sufferers meet the criteria for depression and many have co-morbidity
or other dependency issues. As a result, eating disorders have the highest mortality rate of any mental illness. An estimated
480,000 people die every year from complications related to eating disorders.18 The industry-defined levels of care for eating
disorders are as follows:
Decreasing Acuity
Figure 9
1
Inpatient. For patients in significant physical danger and/or who are medically unstable; these patients cannot be treated safely without
the availability of immediate medical intervention. Typically hospital-based.
2
Residential. 24-hour care/supervision for medically stable patients who are still engaging in eating disorder behaviors (i.e. self-induced
vomiting, restrictive eating, or compulsive exercise); daily self-reflection activities along with individual and group therapy are provided.
May be in hospitals or stand-alone.
3
Partial Hospitalization (PHP). Comprehensive care; typically 5–7 days per week for 6–10 hours per day; usually can continue working or
attending school while in treatment.
4
Intensive Outpatient (IOP). Less comprehensive care; typically 2–3 times a week for 3 hours per day; patients can continue working or
attending school while in treatment.
5
Outpatient. Typically the initial stage of care where the treatment proces begins and treatment is assembled. Also common following
more intensive programs or when a patient can be successfully treated through outpatient care.
INDUSTRY PERSPECTIVE Q1 / 2014
19
Founded in 1993, The Emily Program (TEP) provides
Discovery Practice Management (DPM) specializes
personalized care to individuals suffering from eating
in the treatment of eating disorders, substance abuse
disorders through nine treatment locations in Minnesota and
and emotional disorders for adolescents and adults
Washington. TEP serves a broad scope of populations (all
through nine residential facilities in California and
ages/genders) and cares for patients with a comprehensive
Washington. DPM provides residential behavioral
breadth of acuity from Residential to Outpatient. In contrast to
health services, including individual, group and
the typical eating disorder models that rely heavily on out-of-
conjoint family therapies, task-oriented workshops,
pocket payments for narrowly defined services provided in a
addiction education, stress management courses, goal
residential setting, TEP deploys a differentiated service model
setting and post-treatment planning.
that leads with intensive outpatient services with a deep
focus on clinical outcomes. As a result, TEP is gaining strong
traction with the managed care community who is actively
looking for proven long-term solutions for its members
suffering from eating disorders.
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Care Delivery Settings for Behavioral Health
Given the diverse group of patient populations and diagnoses that cut
one to several months. The services provided in this care setting
across individuals with a broad range of socioeconomic backgrounds,
are designed to address the overall medical, psychological, social
there is a tremendously fragmented and diverse care continuum within
and other needs of the patient. Residential treatment facilities are
behavioral healthcare. Individuals receive mental health treatment in
transitional in nature and help the patient reintegrate into his or her
a variety of ways, including specialty outpatient and inpatient care
respective community.
settings; general medical providers; non-specialty settings such
as schools, nursing homes, and correctional facilities; or through
prescription medication. Many providers are focused on niche markets
serving only individuals with a specific disorder or addiction while
others offer a broad range of services designed to care for several
different illnesses, which may also include treatment of both mental
health and substance abuse. The following is a brief description of the
primary care settings for behavioral health treatment:
• Acute Inpatient: These facilities provide a higher level of care in
order to stabilize patients that are an immediate threat to themselves
or others. This care setting provides 24 hour observation, including
a daily intervention with a multidisciplinary team consisting of
psychiatrist, psychiatric nurses, social workers, and other therapists.
Lengths of stay are typically shorter in nature, ranging from a few
days to two weeks.
• Outpatient/Community Based: These treatment centers usually
provide screening and assessment, medication management, as
well as individual, group and family therapy to patients who have a
diagnosable mental disorder or substance abuse condition but are
able to function at a level that allows them to remain at home or in
the community.
As illustrated in the following chart, mental health spending has
undergone a dramatic shift from high-cost inpatient and residential
settings, to lower-cost outpatient alternatives. Specifically, inpatient
and residential spending dropped from 64% of total spend to 33%
during the period 1986-2005 as community-based setting established
themselves as economical care delivery alternatives. Furthermore,
the sharp increase of prescription drugs to 27% of spending is also
contributing to the shift away from inpatient and residential care.
• Residential Treatment: These facilities provide treatment in a
non-hospital setting, with longer lengths of stay ranging from
INDUSTRY PERSPECTIVE Q1 / 2014
21
Figure 10
While commenting on the pending merger
Distribution of Mental Health Spending by Setting
between the Hazelden Foundation and
the The Betty Ford Center, Mark Mishek,
Hazelden president and CEO, highlights the
100%
19%
80%
42%
growing importance of outpatient settings
within the emergence of ACA and integrated
33%
60%
care approaches:
40%
24%
20%
22%
7%
5%
14%
“The ACA has really opened up everybody’s
eyes to size and scale and multiple levels
0%
2005
1986
Inpatient
Retail Prescription Drugs
Outpatient
Insurance Administration
Residential
27%
of care,” says Mishek.” Some people will
7%
disagree with me on this, but I think the days
of freestanding purely residential facilities are
numbered… The government wants to see
multiple levels of care. You can’t be a strong
partner to accountable care organizations
unless you have all the tools needed to manage
a chronic disease population”.
Source: SAMHSA, National Expenditures for Mental Health
Services and Substance Abuse Treatment 1986-2005
Across various specialty areas of behavioral health treatment, providers and payers alike are seeking ways to move patients out of inpatient
facilities to reduce costs and in some cases improve program effectiveness. This is not a new phenomenon, and there have been general
movements away from institutional care since the 1960s. More recent trends across eating disorder and addiction treatment are to replace
inpatient stays with intensive outpatient (IOP) approaches. In IOP treatment, patients are able to stay in their home while visiting an outpatient
facility daily (or potentially less frequently) for a certain period of time. IOP is also commonly employed during a transition following
residential treatment, allowing patients to benefit from active treatment while attempting to acclimate back to their home environment.
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Alternative Delivery Models
In addition to the more traditional care delivery models outlined
• Primary Care Clinics: Primary care physicians are bracing
above, a number of alternative models are gaining traction in the
themselves for the influx of newly insured individuals seeking
market that may provide some insights into evolving investment
mental healthcare as a result of mental health parity and essential
opportunities in the near term.
benefits under PPACA. The challenge is there are a limited number
• Hospital in a Hospital: Haven Behavioral is pursuing a unique
“hospital in a hospital” model whereby it identifies hospitals that
have excess capacity and fills these gaps with behavioral health
services, leveraging the existing infrastructure of the hospital.
Often hospitals are not focused on behavioral health services,
creating a clear disconnect between physical and behavioral health
care delivery.
• Therapeutic Boarding Schools: Companies like Three Springs, inc.
(acquired by Sequel Youth and family Services, LLC), innerChange
and Excel academy (owned by CRC Health Group) provide
education and therapy services for adolescents with emotional,
behavioral and learning challenges in a boarding school setting.
The delivery model offers treatment for adolescents with acuity
levels below what is more commonly addressed in an inpatient
setting. The boarding school and treatment programs, which are
primarily financed through private pay, typically last from six
months to two years.
of mental health professionals (e.g. psychiatrists) available to serve
these patients. According to government surveys, some 90 million
Americans live in communities with less than one psychiatrist per
30,000 residents. As a result, there is growing effort to integrate
psychiatric care into primary care practices in order to make more
efficient use of the limited number of mental health professionals.
Primary care providers can play a critical role in coordinating
treatment across physical and mental conditions.
• Outpatient Methadone Clinics: Outpatient substance abuse clinics
allow patients suffering from opioid addiction to live at home,
attend work or school, and live a life within the community. A
methadone clinic provides treatment and dispenses methadone
to individuals who abuse heroin or other opioids. Instead of drug
detox and drug rehab programs, methadone clinics use heroin-like
prescription narcotic painkiller to “treat” addictions to narcotics. By
stabilizing the opioid receptors in the nervous system, methadone
can eliminate the patient’s craving without providing the individual
INDUSTRY PERSPECTIVE Q1 / 2014
23
with a euphoric effect. Behavioral Health Group, Colonial
Management Group, and MedMark Services are a few of the
companies with scale in the market. Depending on the individual
patient’s history of opioid use, treatment may last from 12 to
24 months, or longer, as needed. Reimbursement for this care
primarily comes from private pay and third-party insurance.
Founded in March 2012, Tamber delivers behavioral
healthcare inside primary care provider (PCP) practices
and leverages technology and evidence-based protocols
to drive improved outcomes. Tamber partners with PCPs
to identify and treat patients with behavioral challenges
and jointly manage these patients toward remission.
Behavioral healthcare occupies a disproportionate amount
of time for PCPs – 18% of PCP patients take psychotropic
medications and 70% of these medications are prescribed
by the PCP.19 Tamber provides on-site staff or technology
to treat patients and deliver population health analytics to
help the PCP optimize overall outcomes. Approximately
35% of this care is delivered face-to-face and 65% through
telemedicine. After releasing its technology platform in
January 2013 and partnering with its first PCP practice
in April 2013, Tamber is currently operating in five PCP
practices and follows an evidence-based clinical model that
doubles remission and response rates and reduces nonbehavioral medical costs by 10%.20
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Funding Sources
Spending on mental health and substance abuse treatment is expected to reach an astounding $239 billion by 2014, up from $42 billion in
1986. Historically, public programs have paid for the majority of treatment for mental illness, primarily through Medicaid and other state and
local funding. Over the past three decades, however, the financing landscape for mental health services has experienced a meaningful shift.
Today, Medicaid and private health insurance represent the majority of mental healthcare spending, while other state, local and federal government funding, once the primary funding source for mental hospitals, represents a declining percentage (19% in 2014). Since 2001, Medicaid
has been the largest payer for mental health services and will continue to be for the foreseeable future while private insurance, in aggregate,
is the second largest. These two primary funding sources will see continued growth as individuals gain greater coverage for healthcare and
mental health services either through Medicaid or private insurance.
With regards to substance abuse, specifically, public payers (Medicaid, Federal and other state and local payers) have emerged as the
dominant funding source over the last two decades. Public substance abuse spending, which accounted for more than three-quarters of all
substance abuse spending in 2003, is anticipated to reach 83% by 2014 (with state and local representing more than half) as public programs
assume a greater responsibility for treatment.
Figure 11
Distribution of Mental Health Expenditures
100%
18%
14%
14%
12%
21%
24%
24%
26%
3%
7%
4%
11%
3%
11%
Medicare
26%
24%
27%
Medicaid
4%
3%
21%
20%
80%
60%
7%
6%
16%
40%
6%
20%
0%
26%
1986
2003
2006
Out of Pocket
Private Insurance
Private
Other Private
Public
Other Federal
3%
16%
Other State and Local
2014
Source: SAMHSA, Projections of National Expenditures for Mental Health Services and Substance Abuse Treatment 2004 - 2014
INDUSTRY PERSPECTIVE Q1 / 2014
25
The Convergence of Mental and Physical Health
As the broader healthcare industry is bracing itself for the massive influx of 30+ million individuals across the Medicaid and individual
markets, the need for improved integration of behavioral health services into the broader care continuum is extraordinary. The historical
disconnect between physical and mental health has complicated care coordination and diminished care quality for far too long. Incorporating
the newly insured into a highly fragmented and poorly coordinated behavioral healthcare system will undoubtedly lead to higher costs and
lower quality. In order to truly bend the cost curve and improve patient outcomes, the U.S. healthcare system must transition from a siloed
approach solely focused on treating individual conditions with little regard for the whole person, to treating the individual with models of care
purposely built to care for the individual inclusive of any mental and physical conditions.
Figure 12
Historical: Fragmented Delivery Approach
Shift to: Integrated Delivery Approach
Treat the Condition: Siloed approach solely focused on treating
individual conditions with little regard for the whole person
Treat the Individual: Models of care purposely built to care for
the individual rather than a particular, stand alone condition
Integrated Functions
Physical Health
Mental Health &
Substance Abuse
Behavioral /
Mental
• Nutrition
• Therapy
• Counseling
• Medical
• Education
• Pharmacy
Physical
Health
Support
Systems
Key Issues
• Inconsistent care goals
• Incomplete treatment
• Lack of personalization
Source: TripleTree
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Overall Result
• Poor care quality
• Inconsistent care patterns
• High rate of repeat episodes
Primary Advantages
• Holistic Approach
• Care Coordination
• Consistent Treatment Patterns
Overall Result
• Better Outcomes
• Longer Term Impact
• Reinforcement/Support
Certainly, the surge in demand for behavioral health services will create opportunities for providers that can develop innovative and efficient
methods of care delivery. Firms that can effectively scale within the evolving reimbursement environment while integrating with the value based
care initiatives of the broader healthcare delivery system will create significant shareholder value over the coming decades. Innovation among
treatment protocols and methods of delivery will also need to rapidly evolve to meet increasing needs.
Netsmart provides enterprise software solutions that enhance care coordination, improve outcomes, and optimize revenue cycles.
Netsmart serves more than 21,000 clients including 350,000 care providers and more than 40 state systems across behavioral
health, addiction treatment, child and family services, social services, intellectual/development disabilities, public health and
managed care organizations. Through the company’s CareFabric Solution, Netsmart is taking a leading role in breaking down
the historical barriers between physical and mental healthcare to drive a more integrated care delivery system that improves
outcomes at a lower cost. CareFabric, a comprehensive suite of clinical, management and financial solutions and services,
allows for the seamless exchange of patient information between all constituents within each patient’s care continuum.21
Care Fabric
CareRecordTM
A platform providing
a framework
for EHR, Billing,
Scheduling, and
Clinical Workflows
CareConnectTM
Beyond
interoperability,
focused on integration,
a messaging bus
ensuring an open and
free flowing network
CareViewTM
Providing specific
needs to extend
capabilities, connect
disparate communities
and optimize user
experiences
CarePathwaysTM
The use of data
to drive optimal
outcomes and
operational
efficiencies
CareManagerTM
Coordinating care to
ensure healthcare
access, coordination,
affordability and
outcomes
PlexusTM
On demand services,
technology and
delivery providing
predictable results as
needed, when needed
As the ACO movement and other value based care initiatives emerge, many behavioral health providers are taking a wait-and-see approach on
accountable care. Behavioral health is not the principal concern of the currently forming ACOs, as there are other areas of healthcare spend that
are being viewed as more critical to tackle. However, given the high propensity of behavioral health co-morbidities among those with chronic
conditions – especially among patients that create the highest healthcare spend annually – it would seem likely that effective strategies to manage
behavioral health conditions would become a key part of accountable care. Adherence and compliance are key concerns for managing patients with
INDUSTRY PERSPECTIVE Q1 / 2014
27
chronic conditions. In most cases, lifestyle and behavioral change is needed.
Providers need to embed behavioral health principles in the initial presentation
Health Integrated integrates behavioral health into its
of a patient’s care plan and in continued follow-up if there is any hope to reduce
care management programs on behalf of health plans
the cost of caring for patients with co-morbid chronic conditions.
in order to improve the care and lower the costs for
a plan’s high cost members. Instead of segmenting
Reimbursement is already evolving across the behavioral health landscape, but
members into programs for isolated health conditions,
we are only in the early innings. Some behavioral health providers are starting
the company takes a whole-person approach to
to see pressure from payers to accept case rate funding to treat certain types
address the psycho-social issues which impact each
of conditions. Many behavioral health managed care companies are working
member’s ability to change behaviors and adhere
on improving integration of medical and behavioral care by pushing standards
down to providers. However, it is challenging to implement these standards
and affect change with any scale given the highly fragmented nature of the
to care programs. The company believes behavioral
disorders must be addressed to successfully treat
chronic medical conditions.
provider market.
Behavioral health providers are seeking integration with delivery networks that
BlueCross BlueShield of Vermont, seeking to focus
on a whole-person approach to health management,
will help aid in the transition to total population accountable care. Again, there
has recently partnered with Vermont behavioral
is clearly more work to do, but some providers are seeking to implement EMR
health provider, Brattleboro Retreat, creating a
integration and other data interchange with community providers to try to more
company to integrate and manage behavioral health
closely coordinate care among primary care, behavioral health providers, and
and physical care delivery. The new company,
other specialists.
Vermont Collaborative Care (VCC) will leverage
the care management capabilities of BlueCross
One of the challenges facing behavioral health providers across the board
BlueShield of Vermont to provide integrated care
is the lack of comparative effectiveness research and substantive outcomes
management, coordination and support across
studies that evaluates the efficacy of various behavioral health treatments.
physical and mental conditions. In addition, the firm
Some firms have started to report outcomes, but there are not universally
accepted measurements. This, again, may be the result of the industry’s
evolution and the fact that there have been few national players with budgets
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will have a heavy emphasis on data analytics to
review care across physical and mental health while
identifying opportunities to improve care.
that could afford to commission the requisite studies. However, if
the industry wants to be able to dictate to payers how care should be
Psychology Online has developed an online Cognitive
delivered and push back on potential caps on number of visits or length
Behavioral Therapy (CBT) service using live therapists
of stay, it must begin to prove its recommended treatments are effective.
treating clients with moderate to severe behavioral health
Furthermore, providers who can begin to quantify their effectiveness will
be at a significant competitive advantage to garner attractive contracts
with states and managed care companies, and with highly profitable selfpay patients.
While not appropriate in all cases, telemedicine has enormous potential
in the behavioral health market. In fact, some providers report that
patients are more willing to have frank conversations about behavioral
issues in real-time. Unlike providers using online video
communication, the company leverages secure instant
messaging for therapy, pairing chat-based sessions
with associated clinical assessments and clinical work
flows. The results have shown significant advantages
over traditional face-to-face therapy, both clinically and
in terms of patient experience and costs (as reported
in a peer reviewed study), leading to the service being
commissioned by National Health Service in the U.K. with
health issues when they are not in the same room as a provider. This
excellent results:
could lead to better and more efficient treatment for some patients.
• 60-70% recovery vs. 45-50% national average for faceto-face
Without the need to connect a variety of diagnostic peripherals, the
cost of deploying telemedicine to the masses is minimal, as secure,
HIPAA-compliant solutions can be accessed by anyone with an internet
connection and a webcam. Telemedicine could be a solution to
challenges faced in both rural and urban communities who may not have
access to general or specialty care within their geographies.
• 6 sessions to recovery vs. national average of 10-12 for
face-to-face
• Higher levels of patient engagement and compliance
• Higher levels of therapist satisfaction due to
convenience, improved outcomes and depth
of interaction.
Once again, the Department of Veterans Affairs (VA) has been a leader
in telemedicine, leveraging the technology for a variety of types of care
primarily focused on acute, urgent care needs, but it would not be
delivery and assessments, including for behavioral health. The VA
surprising to see expansion into behavioral health treatment over time,
has primarily used telemedicine to connect patients in one VA facility
especially if managed care companies begin to contract with these
to specialists in another facility. Other telemedicine providers have
providers within their networks.
INDUSTRY PERSPECTIVE Q1 / 2014
29
looking ahead
The tailwinds driving growth in the behavioral health market are
As future healthcare models attempt to coordinate care based on the
poised to accelerate. The expansion of health insurance coverage
holistic needs of a patient, instead of treating various conditions in
for behavioral health services creates access to care for millions
silos, behavioral healthcare services will need to become increasingly
of individuals in need. Combined with a cultural environment in
interwoven as a key component of patient care. New alliances,
the United States where seeking care for mental health conditions
partnerships, and acquisitions will be consummated with the goal
is increasingly encouraged and accepted, people will enter the
of incorporating behavioral health treatment into value-based care
behavioral health system in record numbers. They will find a highly
initiatives. However, to stake their claim as a driver of efficiency and
fragmented provider universe operating across a variety of settings,
improved outcomes for the healthcare market as a whole, behavioral
employing diverse models of care, and often not integrated with the
health providers must develop measurements and invest to prove the
treatment for both physical and other mental health conditions.
effectiveness of their care.
The market today for behavioral healthcare is ripe for consolidation
There is exceptional need for quality behavioral healthcare services
due to its fragmentation, but also full of growth opportunities for
across all demographics. It will be exciting to see how the provider
new entrants, given increasing demand for services and an already
market responds to increasing consumer demand and whether
stressed delivery system. Investors seeking healthcare services
enough capacity can be created, how innovation and technology will
exposure will be attracted to the behavioral health market due to
improve care delivery, how care quality will be evaluated, and how
these market fundamentals along with a positive reimbursement
patient-centered care will drive care coordination among behavioral
environment that has not been as susceptible to the declining rates
health and physical health providers.
experienced by many other segments of the healthcare market.
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appendix – select behavioral health m&a Transactions
Date
Buyer
Target
Target Description
Dec-13
Elements Behavioral Health, Inc.
Journey Healing Centers
Operates a drug and alcohol rehabilitation center specializing in dual-diagnosis addiction treatment.
Dec-13Accelera Innovations
Behavioral Health Care Associates
Provides psychiatry, substances abuse, counseling services, and neuropsychological testing to patitents of all ages.
Nov-13
Epiphany Health Ventures, LLC
COPE Today
Web based mental health counseling services provider using licensed mental
health professionals.
Nov-13
Provides opioid addiction treatment services in Dyersburg, Tennessee.
Behavioral Health Group, Inc.
Midsouth Treatment Center Sep-13
Morneau Shepell Inc.
Collage Pediatric Therapy Center Inc.
Behavioral health services for infants through school aged children with various
disabilities including anxiety, depression, and ADD.
Sep-13
Bregal Partners
U.S. Community Behavioral, LLC
Community-based residential and behavioral services for adults and children with intellectual and developmental disabilities in the western United States.
Jul-13
Lee Mental Health Center, Inc.
SalusCare, Inc.
Provides mental health services including outpatient and residential treatment
for patients of all ages.
Jun-13Alaris Royalty Corp.
Sequel Youth and Family Services, LLC Provides behavioral health assessments, school based counseling, sexual
offender treatment and substances abuse services for patients of all ages.
Jun-13
Lifestream Behavioral Center, Inc.
Meridian Behavioral Healthcare, Inc.
Provides behavioral healthcare services and operates acute care, extended care,
addiction, forensic and mental illness treatment centers.
Jun-13
Provides mental health services, substance abuse services and acute care.
Lifestream Behavioral Center, Inc.
The Centers Inc
Jun-13Acadia Healthcare Company, Inc.
The Refuge, A Healing Place, LLC
Operates an acute psychiatric facility for residential trauma, drug, alcohol and
process addiction treatments.
Jun-13Alliance Behavioral Healthcare
Behavioral healthcare services for mental illness, developmental disabilities, and
substance abuse for patients of all ages.
Cumberland County Mental Health
Center
Jun-13Hazelden Foundation
The Betty Ford Center
Behavioral treatment services for alcoholism and drug dependencies with
inpatient and outpatient settings.
May-13
Behavioral Health Group, Inc.
Operates an Opioid Treatment Program that serves
patients with opioid addictions.
Opioid Treatment Program (OTP) in
Columbia, Tennessee
Apr-13Acadia Healthcare Company, Inc.
San Juan Capestrano Hospital
Develops and operates acute behavioral healthcare hospitals and clinics.
and acute inpatient psychiatric facility.
Mar-13
Peak Behavioral Health Services, LLC
Operates a private psychiatric hospital in New Mexico.
Tri-County Mental Health And
Counseling Services, Inc.
Behavioral health, education and support services for abused and neglected
children and adolescents.
Strategic Behavioral Health, LLC
Feb-13Family Healthcare, Inc. INDUSTRY PERSPECTIVE Q1 / 2014
31
Date
Buyer
Target
Target Description
Feb-13Acadia Healthcare Company, Inc.
Delta Medical Center - Memphis
Operates a behavioral health center for individuals struggling with depression,
anxiety, and other behavioral issues.
Jan-13
E4 Health, Inc.
Provides work / life and employee emotional wellness counseling.
Jan-13
Behavioral Health Group, Inc.Kentucky Treatment Centers
Three opioid treatment centers and addiction services in Kentucky.
Jan-13
Trinity Hunt Partners
Operates a substance abuse treatment center in Pompano Beach, Florida.
Corporate Family Network, Inc.
Lakeview Health Systems, LLC
Jan-13
The Meadows, Inc.
Remuda Ranch Company
Operates an eating disorder treatment facility treating women and girls with
anorexia, bulimia, binge eating, and obesity struggles.
Jan-13
Lee Equity Partners, LLC
Eating Recovery Center LLC
Operates an eating disorder recovery center treating patients for anorexia and
bulimia in both male and female patients of all ages.
Dec-12
Centre Partners Management LLC
Monte Nido and Affiliates
Offers residential treatment for anorexia, bulimia, binge eating, and exercise
addiction in California and Oregon.
Dec-12
Pinnacle Treatment Centers, Inc.
NKY Med, LLC
Operates an outpatient addiction treatment facility treating opioid addiction with
family and individual counseling.
Nov-12
Community Education Centers, Inc.
MinSec Corrections Corporation
Operates community corrections facilities, behavioral health treatment centers,
and outpatient programs for the treatment of chemical dependency and mental
health disorders.
Nov-12Acadia Vista, LLCAmicare Behavioral Centers, LLC
Behavioral health services including inpatient psychiatric treatment for patients
of all ages.
Nov-12Acadia Healthcare Company, Inc.
Behavioral Centers of America, LLC
Operates psychiatric facilities and has 3 acute psychiatric hospitals and 1 acute
hospital-in-a-hospital.
Nov-12Acadia Healthcare Company, Inc.
Park Royal Hospital
Inpatient and outpatient behavioral health treatment services to adult &
geriatric patients.
Nov-12Hazelden FoundationHealthWorks NW, LLC
Operates a clinic providing psychiatry, addictions and pain management services
to adolescents and young adults.
Oct-12
Pyramid Healthcare, Inc.High Focus Centers
Provides structured outpatient substance abuse and mental illness treatment
programs in New Jersey.
Sep-12Acadia Healthcare Company, Inc.
Timberline Knolls, LLC
Timberline Knolls is a treatment center for women and girls with eating disorders
and substance abuse problems.
Aug-12
Eastern Maine Healthcare Systems
Mercy Hospital, Portland, MaineHealthcare services including addiction medicine, eating disorder treatment, and
outpatient programs in addition to primary care services.
32
Aug-12
Elements Behavioral Health, Inc.
The Right Step
Drug and alcohol addiction treatment programs including detoxification,
residential inpatient, day treatment, intensive outpatient, sober living, and
aftercare services to individuals in Texas.
Aug-12Humana, Inc.Harris Rothenberg International, Inc. Provides human resource services to increase employee performance including
wellness counseling and work / life balance solutions.
Jul-12
Correct Care Solutions, LLC
Conmed Healthcare Management
Provides healthcare services to correctional facilities including behavioral
services in addition to general healthcare services.
TRIPLE-TREE.COM
Date
Buyer
Aug-12
Pinnacle Treatment Centers, Inc.
Target
Target Description
Recovery Works Drug And Alcohol
Rehabilitation Center LLC
Operates a drug and alcohol rehabilitation center offering rehabilitation
services such as, detoxification, residential, and outpatient services for adults.
Jun-12
Universal Health Services Inc.Ascend Health Corporation
Operates behavioral health facilities offering inpatient, day hospital, partial
hospitalization, intensive outpatient and residential substance abuse treatment
for patients of all ages.
May-12
Pyramid Healthcare, Inc.
October Road Inc.
Mental health and substance abuse services including diagnostic assessments,
community support and relapse prevention for patients of all ages.
Apr-12Acadia Healthcare Company, Inc.Greenleaf Center, LLC
Operates a hospital that provides individualized psychiatric and substance
abuse treatment for patients of all ages.
Apr-12
Medication Assisted Treatment
Operates an outpatient substance abuse treatment center that
Technologies, Inc.
provides opioid addiction treatment services.
MedMark Services, Inc.
Feb-12
Magnolia Creek, LLC
Life Management, Inc.
Provides outpatient substance abuse and mental health treatment including
after work rehab programs and life counseling.
Jan-12
Universal American CorpAPS Healthcare, Inc.
Provides behavioral health services for Medicaid agencies, governments and
commercial payers.
Jan-12Acadia Healthcare Company, Inc.
Sonora Behavioral Health, Rolling
Hills Hospital, Red River Hospital
Operates inpatient psychiatric hospitals that offer treatment for mental health
and behavioral issues. Each facility was acquired from Haven
Behavioral Healthcare.
Dec-11
Strategic Behavioral Health, LLC
Red Rock Behavioral Health LLC
and BHC Montevista Hospital Inc.
Operates an acute short stay hospital and a psychiatric and chemical
dependency hospital to treat patients with chemical dependency ages 50
and older.
Dec-11
Cressey & Company, LP
InnerChange, LLC
Provides educational, treatment, and recovery programs for adolescents and
young adults experiencing emotional or behavioral difficulties.
Dec-11
MedMark Services, Inc.Glass Health Programs, Inc.
Provides opioid addiction and dependency treatment utilizing medicationassisted treatment in healthcare clinics along with individual and group
counseling services.
Nov-11HCP & Company
Polaris Hospital Company LLC
Operates psychiatric and physical rehabilitation hospitals.
Nov-11
The Recovery Place, Inc.
Operates a drug rehabilitation and alcohol treatment center.
Behavioral Health Group, Inc.
Operates behavioral health treatment centers in multiple states.
Elements Behavioral Health, Inc.
Sep-11Frontenac Company
Aug-11
Webster Capital
Center for Discovery
Provides adolescent eating disorder, substance abuse and mental
health treatment.
Jul-11Acadia Healthcare Company, Inc.
Lakeland Behavioral Health System
Operates a regional hospital that provides psychiatric services including acute
care, dual diagnosis programs and residential treatment.
May-11Acadia Healthcare Company, Inc.
PHC Inc.
Operates acute psychiatric hospitals and residential treatment centers to treat
patients with behavioral health disorders including substance abuse and
gambling addictions.
INDUSTRY PERSPECTIVE Q1 / 2014
33
Date
Buyer
Target
Target Description
Mar-11
Corizon, Inc.America Serivce Group, Inc.
Provides managed healthcare services to correctional facilities including
mental health screening.
Mar-11
PHC Inc.
Meadow Wood Behavioral Health
Operates an acute psychiatric hospital providing psychiatric health and
addiction treatment services.
Mar-11Acadia Healthcare Company, Inc.Youth and Family Centered Services, Inc Behavioral health, education and support services for abused and neglected
children and adolescents.
Feb-11
Beacon Health Strategies
Psychare, LLC
Provides behavioral health services for employers and payers, specializing in
behavioral work / life integration.
Jan-11
Pinnacle Treatment Centers, Inc.
Endeavor House Inc.
Provides alcoholism and drug addiction treatment services including detox,
rehabilitation, transitional living and intensive inpatient services.
Nov-10
Welsh, Carson, Anderson & Stowe
Springstone, Inc.
Operates behavioral hospitals providing treatment to individuals and families
suffering from mental illness and addiction.
Aug-10
Community Health Systems, Inc.Forum Health Inc.
Provides behavioral medicines, neuropsychiatric programs, partial
hospitalization programs and intensive outpatient programs for adults dealing
with mental health issues.
May-10
Psychiatric Solutions, Inc.
Provides behavioral health programs to critically ill patients of all ages.
Peninsula Village Residential
Treatment Center
Operates a psychiatric residential treatment center, providing behavioral,
substance-abuse, and sexual abuse treatment services for adolescents.
Universal Health Services Inc.
Nov-09Acadia Healthcare Company, Inc.
34
Sep-09
Psychiatric Solutions, Inc.
Prairie St. John’s LLC Psychiatric
Facility
Operates a psychiatric facility offering behavioral health services including
substance abuse, depression, anxiety, anger management and other behavioral
services to patients of all ages.
Mar-09
Diamond Castle Holdings, LLC
Beacon Health Strategies
Develops and operates behavioral healthcare and substance abuse programs
from Medicaid, Medicare and commercial payers.
Mar-09Acadia Healthcare Company, Inc.Acadiana Addiction Center L.L.C.
Provides residential treatment for patients with alcoholism, drug abuse, and
addiction disorders.
Jan-09American Addiction Centers, Inc.
Solutions 4 Recovery
Operates rehabilitation centers that provide residential drug and alcohol
treatment in California.
TRIPLE-TREE.COM
end notes
1
U.S. Department of Health and Human Services
2
National Institute of Mental Health
3
IBISWorld Industry Report, Mental Health & Substance Abuse Centers in the US, December 2012
4
RBC Capital Markets, Acadia Healthcare Company, January 12, 2012
5
National Institute of Mental Health http://www.nimh.nih.gov/statistics/1ANYDIS_ADULT.shtml
6
Note: this definition was published prior to the release of DSM-5
7
Kaiser Commission on Medicaid and the Uninsured analysis of 2009 Medicaid Expenditure Panel Survey data
8
Kaiser Family Foundation, “Medicaid Health Homes for Beneficiaries with Chronic Conditions,” August 2012
9
Kaiser Commission on Medicaid and the Uninsured, “The Role of Medicaid for People with Behavioral Health Conditions” November 2012
10 Health Affairs, “Future Funding for Mental health and Substance Abuse: Increasing Burdens for the Public Sector”
11
Administration on Aging, Older Adults and Mental Health: Issues and Opportunities. Washington, DC: U.S. Department of Health and
Human Services
12 Houser, A., W. Fox-Grage, & Gibson, M.J. Across the State: Profiles of Long-term Care and Independent Living. Washington, DC: AARP
Public Policy Institute.
13 Substance Abuse and Mental Health Services Administration, “Behavioral Health Issues Among Afghanistan and Iraq U.S. War Veterans”,
Summer 2012
14 Lebowitz, B.D., Pearson, J.L. Shneider, L.S., et al. Diagnosis and treatment of depression in late life. Consensus Statement update.
Journal of the American Medical Association
15 National Association of State and Mental Health Program Directors Research Institute, Inc. and Wall Street Journal, The New Asylums:
Jails Swell with Mentally Ill
16 National Association of Anorexia Nervosa and Associated Disorders
17 The Emily Program
18 The Renfrew Center Foundation for Eating Disorders
19 Solucia, National Medical Survey, Tamber Analysis
20 Verghese Am J Prev Med 2012; Golbody Arch Intern Med 2006
21 Graphic on p27 property of NetSmart Technologies.
INDUSTRY PERSPECTIVE Q1 / 2014
35
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INDUSTRY PERSPECTIVE Q1 / 2014
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