A Glimpse of the Road Ahead for Behavioral Healthcare

NOV 26

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. This parity not only applies to inpatient care but also to outpatient and residential treatment facilities. 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.

The majority of the reactions to and views on the potential implications of the Parity Act and other ACA regulations targeting behavioral health are positive, however, there are some interesting counter views that should be considered:


Positive

  • Broader Access to Care: Access to behavioral healthcare has been a long-standing challenge. The prevalence of behavioral health disorders is staggering and more common than most understand – approximately 26% of Americans aged 18 and older suffer from a diagnosable disorder, but only half receive proper treatment. Therefore, improved access to care will undoubtedly save lives and reduce costs for the patients, payers and employers.
 
  • De-stigmatization and earlier Diagnosis: With improved access to and increased willingness to seek care, many who suffer from mental and/or substance abuse disorders may seek out care earlier, which could drastically help reduce/cure the problem before it escalates.
 
  • Integrated Care. Mental health disorders have historically been treated in silos, with limited consideration for co-occurring substance abuse or physical health conditions. Various ACA incentives will drive a more integrated approach to care delivery and coordination for mental health patients.



Negative

  • Higher Premiums: The Council for Affordable Health Insurance published annual charts which tracked the state mandates and provided estimates of how much each mandate would add in costs to a basic healthcare insurance policy. The Mental Health Parity Act was one of the most expensive mandates and could increase insurance premiums 5-10%.
 
  • Overtreatment and Fraud: The ambiguity of assessing if a mental health patient has “healed” could lead to overtreatment and fraudulent billing on the part of the provider.
 
  • Providers & Payers are Already Overwhelmed. General consensus is that many parts of the behavioral health delivery system (providers and payers (i.e. state and local programs)) are already overwhelmed.  Will coverage expansion create more challenges than the system is prepared to deal with?


Like many other implications of health reform, the ultimate outcome from this regulation is not entirely clear, but TripleTree believes that this regulation will create some exciting new opportunities for the strategic and private equity communities investing in the behavioral healthcare space.

For the past year, our team has been increasing its focus and building its expertise in healthcare services and care delivery, including behavioral health.  Behavioral health has thrust itself into the national healthcare conversation and many attractive industry tailwinds, including de-stigmatization, increased awareness and favorable legislation, will improve access and ability to pay for an estimated 70+ million Americans who suffer from a diagnosable mental disorder. TripleTree believes that the combination of robust demand with an attractive legislative environment presents a highly compelling investment opportunity for both strategic and private equity investors.

In early December, we will be publishing new research report that outlines our views on the market, including patient populations, care delivery models, and the market forces influencing demand and quality.  It will also provide an overview of recent M&A and public equity trends that support our observations of this large, growing and underserved market.

Please let us know if you are interested in receiving a copy when its published, and until then let us know what you think.

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Jonathan Hill
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Barrett Lynner