In This Report

Over the past decade, behavioral health has emerged as one of the fastest growing sectors in healthcare. National expenditures on mental health and substance abuse treatment are projected to reach $239 billion by 2014, a compound annual growth rate of over 6% since 2003.1 The prevalence of behavioral health disorders is staggering and more common than most understand, with approximately 26% of Americans aged 18 and older suffering from a diagnosable mental disorder. However, the more shocking metric is that less than half of these individuals receive proper treatment. Access to healthcare has been a challenge for our country for some time, and access to high-quality behavioral healthcare is clearly no exception. Historically, behavioral healthcare has been available to more affluent families who could afford to pay out-of-pocket and by individuals subsidized by various government programs (e.g. federal, state and local). Many traditional health insurance programs have historically lacked adequate coverage for behavioral health treatment and when combined with the uninsured, a significant portion of our population has been underserved, leaving them vulnerable to high costs and potentially life-threatening disorders.

More recently, behavioral health has been thrust into the national healthcare spotlight. School shootings and other recent tragedies have intensified our country’s awareness of the harmful and costly consequences of those who go untreated. At the same time, the long-standing stigma associated with mental health disorders is slowly dissipating and more individuals across the spectrum of diagnoses are actively seeking treatment. From a regulatory perspective, access to care is poised to drastically improve as 30+ million Americans across the Medicaid and individual markets enter the system and other favorable regulations requiring coverage for behavioral health take hold.

Today, the behavioral healthcare market sits at an important inflection point. While the demand for mental health and substance abuse services is reaching unprecedented highs, the supply of services/providers across the behavioral health continuum is neither sufficient nor optimally aligned with the broader care continuum to drive improved outcomes at lower costs. The behavioral healthcare landscape has evolved into a fragmented and often chaotic web of providers and delivery models that take a myopic view of treating specific conditions rather than a holistic view of the individual, who frequently suffers from several comorbid physical and mental health conditions.

Given these rapidly evolving market dynamics, TripleTree believes the behavioral health market represents a highly compelling investment opportunity for both strategic and private equity investors. This report will outline TripleTree’s views of the behavioral health landscape, including patient populations, delivery models, and funding sources; and will evaluate the critical need for integrated delivery models that address the entire individual rather than a specific, standalone condition. The report will also provide an overview of recent transaction activity and trends that support our observations of this large, growing and underserved market.