TOP 3 GROWTH AREAS

Discover new opportunities among populations, geographic areas and treatment modalities

Rebounding state budgets, new legislation and a growing number of insured Americans have set the stage for significant growth opportunities in the behavioral healthcare space. However, each organization will need to assess its best prospects to reach more individuals and bring in greater cash How. Experts agree that the treatment centers that stand to benefit the most in the new era of growth are those that focus on:

* Currently underserved and growing populations;

* Geographic locations poised for expanded services; and

* High-demand treatment modalities.

The Affordable Care Act (ACA) is paving the way for growth, most notably by increasing the population of insured Americans who have coverage and are seeking health services. ACA also designates mental health and substance use disorder benefits as "essential" and requires coverage of them for millions of Americans who previously didn't receive such benefits. More coverage equals more demand.

As more Americans seek behavioral health services, investors are quickly responding to the promising outlook. A historically fragmented industry, behavioral health is coming into its own.

"The behavioral health world is definitely experiencing steady growth," says Dexter Braff, president of the Braff Group. "Buyers are very interested in this space."

Overall, he says, substance-abuse and developmental-disabilities services have experienced the most merger activity recently. According to data from the Braff Group, between 2005 and 2014, there have been 179 merger and acquisition transactions in behavioral healthcare financed through private equity.

While those may be general industry trends, experts say more specific analysis is needed to determine who wants services and which treatment modalities are in highest demand to help treatment centers arrive at the best strategic decisions.

1

Populations

VARIOUS SEGMENTS OF THE POPULATION have emerging behavioral healthcare needs that currently are not being met. Experts say seniors are the most significant market as well as certain pediatric populations and those released from prison who are being enrolled in Medicaid. These underserved population groups offer behavioral healthcare providers a competitive opportunity to carve out a niche and serve the community now and into the future.

The aging of America brings upcoming opportunities in serving a large population of baby boomers. According to the Centers for Disease Control and Prevention, longer life spans and the aging of baby boomers will combine to double the number of Americans age 65 years or older during the next 25 years to about 72 million people. By 2030, older adults will account for roughly 20 percent of the U.S. population.

"The question is: how do we as a field do a better job coordinating with primary care and hospitals to identify these people and screen them?" says Patrick Gauthier, director of AHP Healthcare Solutions and Behavioral Healthcare editorial advisor. "So many of our tools and approaches have been developed for much younger populations, and our collaborations are with providers that serve much younger populations."

Gauthier says there is a real need for behavioral healthcare specialists to coordinate with other specialists who commonly work with the older population, whether it's oncologists, cardiologists or geriatric neuropsychologists, for example.

"It's going to be critical that we as a specialty begin to talk to other specialists and not just to the hospital and not just to the primary care physician," he says.

One prevalent behavioral healthcare need among seniors is addiction and substance abuse treatment. According to the University of Pennsylvania Health System, there are 2.5 million older adults with an alcohol or drug problem in the United States. The university also reports that older adults are hospitalized just as often for alcoholrelated problems as they are for heart attack. Nearly 50 percent of nursing home residents have alcohol-related problems.

New program

Doug Tieman, the president and chief executive officer of Caron Treatment Centers, and Behavioral Healthcare editorial advisor, says Caron identified this need within the community and recently added a 10-bed program specifically catering to older adults at its Pennsylvania campus. Just a week after opening, seven of the 10 beds were already filled.

The new program is designed to treat elderly patients and address their unique needs clinically and logistically. For example, the facility space has handicapped showers, wider hallways, handrails, bedrails and even an interior color scheme chosen to appeal to the population's preferences. Staff are trained to identify medical concerns often seen in older adults, such as vitamin deficiencies, and are also prepared to address co-occuring medical conditions.

The Pennsylvania campus also offers a 12-Step program for older adults with topic discussions such as loss of a spouse, retirement, reduced energy or estrangement from family.

"It's really about designing a specific program to deal with a unique need, which requires very deliberate treatment protocols,'''Tieman says.

Caron also plans to build a new 35,000 square foot medical center, which will include 20 additional beds for its senior program so that staff will be able to manage the medical issues the population presents. It's common for older patients to have one or more chronic conditions that might complicate behavioral health treatment.

If a treatment center develops a targeted clinical program, marketing to potential patients will become a business imperative. And there's an advantage: Seniors often reside in a central and easily identifiable area, such as a senior community, assisted living center or nursing home, so it's a market that's relatively easy to reach, Gauthier says.

More pediatric patients

The senior population isn't the only group with growing demand. Gauthier says children are increasingly in need ofbehavioral services.

"We haveaglobally ill-equipped children's mental health system," he says, adding that he believes the system is currently only meeting about 10 percent of the need in this market.

While low-income children fall under the welfare system, Gauthier says he sees an opportunity for providers accepting Medicaid to coordinate with the foster care system and pediatricians to target minors who could benefit from early behavioral health treatment.

For instance, he says the need is great in his own home state of California where tremendous numbers of children are being enrolled into Medicaid managed care plans.

"The networks simply don't have the capacity to meet the needs of all these children, and that's a problem today. And it's going to continue to be a problem," Gauthier says. "However, it's an opportunity because you have this great mass of people who are having difficulty accessing services and the entrepreneur who is looking for an opportunity is going to tailor his practice or a portion of his practice or business to meet the needs of children in Medicaid."

Other strategies for reaching the population include using telehealth in rural areas or partnering with school-based health centers to co-locate behavioral health services on school grounds. Gauthier says he has seen success among initiatives that co-locate services.

"It was a wonderful idea, and it's not all that difficult to execute," he says. "What's lovely about it is then you've got a child in your family who has made a connection with a professional, a community behavioral health professional, in the school, and they can continue that relationship outside of the school."

Also related to Medicaid, coverage expansion under ACA has created a greater need among the criminal justice population. Individuals being released from prisons and jail systems now qualify for Medicaid in those states that opted to expand their Medicaid programs, Gauthier says.

"It's so automatic in a lot of states, they are enrolling them before they leave prison," he says.

There's an opportunity to provide case management to these high-needs individuals as they try to re-enter society, using evidence-based practices that address criminal behavior and criminal thinking. Many programs have experience in treating individuals with previous convictions, although some don't address the population directly.

2

Geographic Markets

AS BEHAVIORAL HEALTHCARE providers are looking for new opportunities, geography is another factor to consider.

Experts agree that opportunities are abundant in states that opted to expand Medicaid under the Affordable Care Act. Gauthier suggests treatment centers consider expansion in states that have been successful in securing innovation grants, created patient-centered medical home initiatives or voiced excitement about the possibilities of home health.

Another indicator of growth potential is in states with large numbers of Accountable Care Organizations (ACOs), such as California and Florida. Gauthier says the challenge, however, is that many of the ACOs are hospital owned and will likely want to meet their behavioral health service demands in-house before turning to outside partners.

"So even though we've got 600 to 700 ACOs around the country, only about 15 percent are partnering at this moment with behavioral health providers in the community," he says.

He suggests behavioral health providers may need to rethink their marketing strategies to ACOs. For example, instead of suggesting that they can do what a hospital may already be doing better or more efficiently, offer to partner with the ACO to provide services once the patient is discharged and back in the community. Aftercare is a growing service need that hospitals are unlikely to have the capabilities to offer, yet it's critical in hospital quality metrics.

"You can provide a ring of services geographically around them to expand their service area and expand their reach. Of course the idea is now that they are an ACO and they are being reimbursed on a value basis, readmission is now not a good thing. So that's the pitch," he says.

Another avenue of behavioral healthcare experiencing state-by-state growth is autism services. According to Autism Speaks, an autism science and advocacy organization, 38 states have already enacted autism insurance reform laws that include coverage for autism services, and an additional seven states are pursuing reform in 2015.

"That is creating tremendous-I mean tremendous-growth opportunities," says Nancy Weisling, managing director of the Braff Group. "Each state varies depending on the legislation as to what services are covered, for what age limits, and what the caps are on the amount of services that are provided. But this is a very good thing."

She says states that have passed legislation more recently such as Nebraska or Maryland may be areas for providers to consider since they likely aren't oversaturated and should have demand. Although she says it's important behavioral healthcare providers look closely at each state's reform law to see the depth and length of coverage each state provides before making investment decisions.

While the Braff Group has noticed significant growth in addictions and substance abuse services across the country, Weisling says merger and acquisition data and feedback from clients indicate there isn't any one area of the country growing in this space faster than others.

"It doesn't seem to discriminate where it is," she says.

3

High-Demand Treatment Modalities

IN THE ERA OF ACOS, health homes and Medicaid managed care plans, more payers are looking for community based services. While the private psychiatric and medical detox programs will continue to see high rates of consolidation, experts aren't predicting huge increases in the overall number of beds in this segment.

"Without a doubt, the emphasis is on outpatient/ambulatory services, so we suggest expanding residential services today is not a safe bet until we know more about what CMS is going to do with the IMD (Institutions for Mental Diseases) exclusion as it relates to residential SUD treatment," Gauthier says. "Some providers are shifting their residential concerns entirely to private pay and commercial insurance to be sure."

As a result of shrinking expectations for residential utilization, intensive outpatient programs (IOPs) are on the rise.

Rocky Hill, director of Hill Recovery in California, runs a full-service outpatient addiction center that offers a partial hospitalization program (PHP), a daytime IOP and a night IOP.

"I think there's a greater demand. I don't know whether it's coming from the insurance-the payers-but there seems to be more awareness on the part of family members," Hill says.

During his career, Hill has offered both residential treatment and outpatient services and believes that clinically patients are often more successful in an outpatient setting.

He says the business advantage to outpatient programs is that they require less in infrastructure investments. Once adequately staffed, outpatient programs can sustain with just the space for group rooms and patient offices, plus an understanding of the regulations that guide such programs.

"You can start tomorrow and get bigger like we did," he says.

Observers also believe they'll see an increase in medication-assisted treatment (MAT), likely because of the lower cost model. Gauthier says he believes MAT will be used more often to either supplement or replace the 28-day treatment model.

Hill uses MAT in his center and says creating a safe environment for outpatient MAT is a must. In particular, contracts with procedures outlined to integrate the family or a designated person to help manage the patient can support the outpatient experience. For example, a household might be given a safe to secure the medication.

"Our patient titration is symptom-driven, patient-driven and slow," he says. "It's not a race to get to the end. What we want to do is allow the person to become stable."

Peer support services are another modality of care that will continue in coming years, although peer counselors are most often used in aftercare.

"Peer support has now three to five years experience in states like Georgia, where it originated, and it will only continue to grow. It's a great example ofleveraging real community health workers," Gauthier says. "It's very reflective of the population you're serving, of the culture and the geographic environment where people live and work."

With pent-up demand and new capital coming into the market, behavioral healthcare will continue to see unprecedented opportunities. The challenge is to build a business plan that best takes advantage of the momentum.

Jill Sederstrom is a freelance writer based in Kansas City.