Investments in Behavioral Health: Drivers and Outlook - Behavioral Health Crash Course Webinar...

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Investments in Behavioral Health:Drivers and Outlook

April 5, 2016

© 2016 Epstein Becker & Green, P.C. | All Rights Reserved. | ebglaw.com 2

This presentation has been provided for informational purposes only

and is not intended and should not be construed to constitute legal

advice. Please consult your attorneys in connection with any fact-

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© 2016 Epstein Becker & Green, P.C. | All Rights Reserved. | ebglaw.com

Purvi Maniar

Member of the Firm

• Healthcare and Life Sciences and Corporate Services Practices

• Provides transactional legal guidance and strategic advice inthe healthcare and technology industries

• Represents private equity investors as well as providers intransactions in the behavioral healthcare space

314-395-2775

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[email protected]


Prevalence of Behavioral Health Issues

The United States has the highest prevalence of mental disorders in the world

27% of the U.S. population will experience some sort of mental disorder within a given year

47% of the population are at risk in their lifetimes

Standardization of depression screening by primary care physicians

Adolescents – ages 12-18

Adults, including pregnant and post-partum women

High comorbidity between medical and mental conditions

75% of high-users of hospital inpatient services had behavioral health diagnoses, versus 32% of

patients who were not high-users

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Increased Awareness; Improvements in Care

Increased awareness and decreased social stigma

Public health education and better diagnostic tools have created greater awareness and

understanding of behavioral health disorders

Understanding and acceptance of substance abuse as a disease has helped decrease social

stigma associated with seeking help

Continued clinical advancements

Advancements in therapy and medication management have yielded new and better

procedures for treatment of mental disorders and substance abuse disorders

Another driver is the need for clinics to develop youth, elderly and gender-specific programs

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Increase in Reimbursement Coverage

Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

Equalizes annual or lifetime dollar limits (Mental Health Parity Act of 1996)

Equalizes cost sharing, treatment limitations and out of network coverage

Patient Protection and Affordable Care Act of 2010 (PPACA)

Expands MHPAEA requirements from large group plans to:

Most individual and small group plans

Plans offered on health insurance exchanges

2016 Medicaid Change

Will provide coverage for stand-alone psychiatric hospitals

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Alternative Payment Models; Triple Aim

Alternative payment models can advance effective behavioral healthcare

ACOs, bundled payments and other value based payment models

Payments for chronic care management and care coordination activities

Providing effective care for behavioral health disorders can advance “Triple Aim”:

Improvement of the patient’s care experience

Improvement of the health of patient populations

Decreasing the per capita costs of healthcare

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Growth in Investment

Recent years have seen record growth in behavioral health mergers and acquisitions

2014 health care M&A activity increased by 18% but behavioral health increased by 24%

Rise in behavioral health deals from 21 in 2010 to a record number of 43 in 2015

Major Players

Acadia Healthcare Company – 585 facilities; 6 recent multi-facility acquisitions

Universal Health Systems – over 225 facilities; 4 recent multi-facility acquisitions

Pyramid Healthcare Inc. – over 60 facilities; 4 recent multi-facility acquisitions

Continued Fragmentation

In 2015, most of the 14,000+ substance abuse providers were still owned by operators who owned

only one or two facilities, with larger operators owning less than a dozen facilities

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Outlook

Demand will continue to outpace supply

Due to high prevalence, development of new therapies, increases in reimbursement coverage,

value based payment models and focus of healthcare reform on enhancing the health of

populations while avoiding unnecessary costs

Behavioral healthcare specialty providers will face competition from hospital systems

Cost of adding beds to an existing system is generally lower than the cost of acquiring them

9% of general hospitals with behavioral health projects under construction; 11% with projects

on the books

Focus on compliance with legal and regulatory requirements will grow

Increased legal requirements due to third party reimbursement

Larger, multi-state operators will invite increased scrutiny

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Legal and Regulatory Compliance

Licensure

Requirements vary by state depending on types of facilities and programs offered

Separate from state requirements applicable to licensure of professionals

Corporate Practice of Medicine

Many states restrict non-physician ownership and control of facilities employing physicians and

other professionals

Requirements and acceptable means of compliance vary significantly by state

Privacy

States have varying and stringent standards applicable to mental health records which are not

preempted by HIPAA

New proposed federal regulations would increase requirements regarding confidentiality of

patient records related to substance use disorders

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Legal and Regulatory Compliance

Fraud and Abuse

Federal and state anti-kickback and self-referral restrictions become applicable and important as

providers consolidate and start to seek third party reimbursement

Current regulations can pose challenges to clinical and financial integration of behavioral and

physical healthcare services

Certificate of Need

Construction, expansion and change of ownership of facilities can require lengthy state review

and approval process based on assessment of public need

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Questions?

Purvi B. Maniar

Member of the Firm

[email protected]

212-351-3757

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