Behavioral healthcare is red hot in the investor community. When I started in the field 15 years ago, behavioral healthcare in some ways was a backwater of general healthcare, much maligned, usually ignored, with no parity regulations. Sure, there were some big players such as Psychiatric Solutions and the like, but mergers, acquisitions, and large investments were hardly everyday news in the field.
Boy, have times changed.
With increased funding opportunities (at least, on paper) made possible by the Affordable Care Act, a healthier overall economy, and decreasing stigma surrounding mental health and substance use problems, investors once enamored by long-term care, durable medical equipment, and other healthcare sectors have now turned their eyes on – and opened their wallets for – the behavioral healthcare field. Treatment center executives, particularly at residential operations, are receiving calls every week about their interest in selling, acquiring, or merging.
American Addiction Centers went public late last year. Acadia is about to close a billion-dollar deal for CRC Health Group. Elements is for sale for reportedly an astounding 12-times EBITDA. A new treatment chain backed by $200 million also is emerging on the East Coast.
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Why should you, as a behavioral healthcare executive, be interested? Because like it or not, if you are a private residential operation, someone will likely come knocking on your door—if you don’t have suitors already. Large investments in your competitors means you, too, will have to search for capital to remain competitive.
If you are a CMHC executive, expect new privately funded outpatient providers to emerge in your communities. While Medicaid-reimbursed clients might not be their target, those with private insurance will be—potentially capturing a valuable part of your funding mix.
All good things come to an end, and our field won’t remain the hottest healthcare trend on Wall Street forever. Ideally, the rapid influx of capital and institutional interest we’re seeing now will have a long-term, lingering presence, leaving behavioral healthcare no longer a distant cousin of the rest of the healthcare field. Those who stay on top of the latest developments and actively seek new opportunities will likely do best; those who view this as just a fad with no impact on them will likely be surprised and maybe even unemployed.