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Understanding the Opportunities and Challenges

of Investing in Behavioral Health Services

A 2018 survey by the opportunities ahead for both The number of children diagnosed on changes in the location footprint, clinical
Substance Abuse and Mental organic and inorganic the autism spectrum rose from approxi- leverage models and other recent initia-
Health Services Admin - growth. On the organic side, mately one in 150 in 2002 to one in 59 as tives undertaken by the business to
istration (SAMHSA) found individuals, insurers and of 2014, according to the CDC. enhance operations.
that approximately one in policymakers increasingly Researchers have also found that long- Investors can benefit from hiring a dili-
five adults (47.6 million) in recognize the value and term outcomes improve when treatment gence advisor with experience in the sec-
the U.S. had experienced a importance of behavioral begins earlier. So, health regulators have tor and knowledge of key areas including
mental illness in the past health as a component of encouraged the growth of ABA clinics to reimbursement, handling of protected
year, and 17.7 million suf- overall health. On the inor- service this population into adulthood. health information (PHI), clinical opera-
fered from a major depres- ganic side, many of the However, supply remains limited, partly tional models and more.
sive episode. The need for fastest-growing clinics and due to a lack of trained Board-Certified
behavioral health services services see opportunities Behavior Analysts (BCBA). The bigger picture
has accelerated significantly for regional and national Many local providers offer services Today, many more people suffering from
in the United States. BY VIN PHAN consolidation ahead. regionally, and some providers, such as the behavioral health issues have access to a
Considering the shortage Many of the providers Center for Autism and Related Disorders broader spectrum of care and they can do
of behavioral health services pursuing a consolidation (CARD), have expanded nationally. Yet, so in a more cost-effective way as payers
and the growing availability of behavioral strategy were established in 2008, when the ABA sector remains fragmented and are expanding coverage. And while the
health coverage from health insurance provisions included within the Mental requires more consolidation. investment in this sector carries potential
providers, as well as the critical and often Health Parity and Addiction Equity Act of risks of greater state intervention in the
chronic nature of the needs they address, 2008 (MHPAEA) began to require private Due diligence concerns future, it also creates tremendous opportu-
businesses related to behavioral health–a insurers to reimburse patients for a variety From a due diligence perspective, nity – opportunity for behavioral health
category encompassing various clinics and of behavioral health needs. Specialists saw healthcare is a highly regulated sector with patients to benefit from the care resulting
professional groups that help people suf- an opportunity, and they began forming very complex pricing and payment mech- from a higher level of investment in these
fering from a host of challenges, may seem clinics to care for patients with one or anisms, and cash flows should be exam- critical services.
like a gainful opportunity for investors. more of these needs. A decade later, many ined carefully. Reported revenue may not
However, behavioral health service is a of these firms have matured but are still be supported by actual cash collections. Vin Phan is a Partner and National Practice
complex sector where success relies on growing rapidly, and they are now looking Prospective investors need a deep under- Leader for BDO’s Healthcare Transaction
specialized knowledge and regulatory for capital or strategic partners to expand standing of the reimbursement trends and Advisory Services practice based in Nashville,
expertise, so it’s important to understand their catchment area. related revenue recognition for the busi- Tennessee.
the potential challenges and complications Autism services – a robust subcategory ness’ specialty.
in that space before investing. Autism services have grown significant- Furthermore, before making a bid, a Contact:
ly. Demand for Applied Behavior Analysis would-be buyer should assess the sustain- Alfredo Cepero, Managing Partner
A growing market (ABA) services has increased markedly ability of the business’ earnings, paying 305-420-8006/ acepero@bdo.com
Demand for behavioral health services since 2008, spurred both by greater avail- close attention to the historical operating
has grown rapidly over the past decade, ability of insurance coverage and a growth results, as well as the pro forma impact of Angelo Pirozzi, Partner
and market observers see a wide range of in unsatisfied demand. new payor contracts, new geographies, 646-520-2870 / apirozzi@bdo.com

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10 February 2020 southfloridahospitalnews.com South Florida Hospital News