Behavioral Health Acquisitions Surge: What’s Happening?

by Jon Scaccia August 19, 2024

Have you ever wondered who owns your local mental health clinic or rehab center? It turns out, many of these facilities are now owned by private equity firms and other for-profit companies. This trend has grown significantly over the last decade, raising important questions about the future of behavioral healthcare. Let’s dive into the findings of a recent study that sheds light on this phenomenon.

The Rise of Private Equity in Behavioral Health

Private equity (PE) firms are investment companies that buy businesses to improve them and sell them for a profit. Over the past decade, PE firms have increasingly turned their attention to behavioral health facilities, which include mental health and substance use treatment centers. Why? Because these facilities, often fragmented and lacking in large-scale integration, present an opportunity for investors to consolidate and create efficiencies.

According to the study, the number of behavioral health facilities involved in acquisitions skyrocketed from just 32 in 2010 to an astounding 1,330 in 2021. That’s a growth of over 4,000%! In total, 2,806 facilities were acquired during this period, with PE firms accounting for about 60% of these acquisitions.

Why the Sudden Interest?

There are a few reasons behind this surge in acquisitions:

1. Fragmentation: Behavioral health services are less connected compared to other healthcare sectors, making them ripe for consolidation.
2. Policy Shifts: Laws like the Affordable Care Act and the Mental Health Parity and Addiction Equity Act have expanded insurance coverage for behavioral health, making these services more accessible and in demand.
3. Decreasing Stigma: As society becomes more accepting of seeking help for mental health and substance use issues, demand for these services has increased.

What Types of Facilities Are Being Acquired?

Most of the facilities acquired were outpatient centers, which provide services without requiring patients to stay overnight. Out of the total acquisitions, 2,073 were outpatient facilities, with 1,428 offering only mental health services. Interestingly, PE firms often follow a “platform and roll-up” strategy. This means they start by acquiring a foundational facility (the platform) and then expand by buying additional facilities (the roll-ups) that complement or enhance the services of the platform.

For example, a PE firm might acquire a chain of outpatient opioid use disorder treatment facilities and then continue to buy similar centers to build a stronger presence in that market. This approach allows PE firms to streamline operations and create a recognizable brand.

Geographic Trends

The study also highlighted geographic trends in these acquisitions. About 25% of acquired facilities were located within 20 miles of each other, 50% within 80 miles, and 75% within 319 miles. This clustering suggests that investors are focusing on specific regions to build market dominance.

The Big Question: Impact on Care

While the consolidation of behavioral health facilities might create efficiencies, it also raises concerns about the impact on patient care. Will the quality of care improve, or will the focus on profits lead to cutbacks and reduced service quality? The study calls for further research to evaluate the effects of these acquisitions on access to care, treatment quality, and patient outcomes.

Why Should We Care?

For public health practitioners, researchers, and anyone invested in mental health and substance use treatment, understanding these trends is crucial. The consolidation of behavioral health facilities could have far-reaching implications:

1. Access to Care: Will consolidations make it easier or harder for people to access services?
2. Quality of Care: Will the emphasis on profits compromise the quality of care?
3. Cost of Services: Could consolidation lead to higher costs for patients?

The Road Ahead

The study emphasizes the need for continued research to understand the full impact of these acquisitions. As more facilities come under the control of PE and other for-profit entities, monitoring changes in service provision, patient outcomes, and overall healthcare spending will be essential.

In the meantime, patients and communities should stay informed about who owns their local healthcare facilities and how these changes might affect them. Transparency and accountability will be key to ensuring that the consolidation of behavioral health services ultimately benefits those who need them most.

Join the Conversation

We’d love to hear your thoughts and experiences related to this topic:

• Have you noticed changes in the availability or quality of mental health or substance use services in your area?
• What do you think about the growing influence of private equity in healthcare?

Share your insights in the comments below or join the discussion on social media using the hashtag #BehavioralHealthAcquisitions.

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