Private equity (PE) firms have been rapidly entering the health care market, including in behavioral health care. In fact, one report found that 60 percent of all PE deals since 2018 have involved behavioral health organizations. In a recent study examining the distribution of PE-owned behavioral health facilities in 2022, 6.2 percent of mental health agencies and 7.1 percent of substance use agencies were owned by PE firms. Some states, such as North Carolina and Colorado, reported 25 percent of their behavioral health facilities as privately owned.
PE firms moving into behavioral health care has come during a time where a considerable number of U.S. individuals are experiencing mental health struggles. Approximately 30 percent of adults and 50 percent of adolescents reported symptoms of anxiety/depression during the COVID-19 pandemic, with Black, Hispanic and Asian Americans reporting even higher rates. Despite elevated rates of reported mental health symptoms, access to mental health treatment continues to be difficult. People of color experience disparities in access to mental health care when compared to white individuals due to barriers such as cost, lack of culturally-informed services, and systemic discrimination. The demand for more easily accessible, evidence-based behavioral health care has provided PE firms with an opportunity to step in to fill these gaps. However, significant concerns emerge around the effect that PE firms have on behavioral health care access, quality and cost especially as a way to reduce mental health disparities for racial and ethnic minority groups.
Increasing behavioral health service capacity
Increasing the staff and infrastructure capacity of the behavioral health system has been shown to be a policy priority at the state and federal level. According to a recent study, PE firms claim to be investing in the behavioral health sector for the purpose of fixing the broken system. Beyond behavioral health and substance use facilities, PE firms have also purchased behavioral health technology (e.g., apps) which can bring mental health treatment to more individuals (e.g., persons living in rural areas). Yet, reported layoffs and closures of PE owned behavioral health facilities may exacerbate staffing problems and reduce access to care. With high rates of staff turnover and lagging physical and technological infrastructure that requires financial resources across the whole system, PE firms can exacerbate these challenges, in turn, reducing access to critical behavioral health services. For example, closing facilities have been shown to reduce preventative treatment options resulting in communities of color experiencing higher rates of mental health crises and emergency department use.
Providing evidence-based, efficient behavioral health treatment
Though some research has examined the quality of services provided in privately-owned health facilities, researchers have not yet examined this question in the context of behavioral health care. When looking at the impact of PE ownership on health facilities, research shows mixed and even negative impacts on the quality of care provided. Behavioral health services struggle with implementing evidence-based care with as little as 2 percent of clients across states receiving evidence-based treatment. Some of the reasons attributed to the lack of evidence-based treatment penetration point to a lack of federal and state financial investment. Culturally-adapted evidence-based practices face similar barriers to implementation in behavioral health care leading to few culturally tailored options for communities of color. There is no current research into whether PE firms can help provide broader access to culturally adapted behavioral health practices despite firms funding various other evidence-informed practices (e.g., medication-assisted treatment).
Cost of care at PE owned facilities
Limited research examines the cost of care at PE owned facilities for behavioral health patients. Looking at reports on cost of care for patients in health care broadly, PE owned facilities charge patients more and focus on services that bring the highest return on cost focusing on the profitability of care. In behavioral health care, PE firms have invested in high-return services by buying organizations specializing in autism services and substance use facilities where a majority of PE investment has been concentrated. The cost of behavioral health treatment continues to be a leading barrier to accessing care and contributes to disparities in access for racial and ethnic minoritized groups. Disparities in access to behavioral health treatment can broaden if PE firms prioritize profit over making care more affordable for all.
A Call to Action
Persistent gaps in the evidence on the health equity implications of PE firms acquiring behavioral health agencies creates a critical need for robust health services research examining issues of cost, access, and quality of care to provide the evidence framework for policymakers. Although there is growing interest and concern about the implications of PE acquisitions in health care, especially behind PE owned addiction treatment centers, there has been little focus on behavioral health outcomes. This is the moment for the field of health services research to influence future legislation and regulation with timely and rigorous research.