The mental health market faces dramatic growth and evolution over the next 10 years. Several factors are powering the change globally, with various dynamics impacting individual regions and countries in different ways, including:

  • Government and healthcare industry recognition of mental health issues, and resulting regulatory and policy responses (e.g., Mental Health Parity and Addiction Equity Act, integration of Medicaid funding streams) and increased levels of dedicated government funding
  • Dynamic public funding environments — with levels of attention and funding increasing for some countries or conditions, and becoming constrained for others
  • Reduced stigmatization of mental illness
  • Increased incidence of many categories of mental illness, such as learning disabilities, autism spectrum disorder, personality disorder, neurological/neuropsychological conditions, etc., due to greater patient and clinician awareness
  • Increased prevalence of dementia and related care needs
  • Increased prevalence of substance abuse
  • Improved mental healthcare delivery capabilities
  • Undersupply of mental health professionals

The resulting demand growth for mental health services, combined with the need for improved outcome measurement and the requirement for integration with physical health providers, brings a host of opportunities and challenges for providers, payers and investors.

Key questions and challenges

As mental health assumes an increasingly prominent role in the healthcare system, we help organizations address a range of key issues:

  • Providers
    • Which markets have the greatest unmet demand based on patient population growth, reimbursement/payer dynamics, competitive dynamics, quality of the supply-side response, policy frameworks, regulatory landscape, etc.?
    • Which levers can we pull to improve performance (e.g., greater service line specialization, pathway integration, enhanced reimbursement, improved staffing models, improved clinical practices, enhanced technology)?
    • How can we integrate physical and mental healthcare for the benefit of patients and caregivers?
    • How can we take full advantage of risk-sharing opportunities for complex populations?
    • How should shifts toward outpatient and/or community-based care settings influence investments?
    • In the U.S., what are the optimal in-network (and associated requirements to measure and report outcomes) and private pay strategies?
  • Payers
    • What are the most attractive opportunities for membership growth given both increasing managed care penetration of complex populations and state integration of physical and mental health programs?
    • How can we most effectively support provider integration of physical and mental health and measure outcomes?
    • How can we deal with a shortage of mental health providers and the difficulty in providing adequate access? How can we effectively deploy telehealth and improve step-down to the community setting?
    • How should we reconcile and deploy both care management and provider support across additional and less complex populations?
    • How can we develop and deploy provider reimbursement models that more effectively align pay with performance?
  • Investors
    • Which mental health provider segments represent opportunities?
    • What is the outlook for reimbursement rates and contract structures?
    • Will providers be able to expand and deploy services outside of their current footprint?
    • What are the opportunities to drive economies of scale?
    • How are providers using tech-enabled service providers to differentiate among payers and patients?
    • In the U.S., what is the potential impact of federal legislation (e.g., ACA repeal), and how will the increasing pressure to be in-network with major payers manifest itself?

Examples of our work

To learn more about how we help clients create value, please refer to these case examples:

  • Supported a leading Blue Cross Blue Shield managed care organization with state-by-state research on the behavioral health landscape in 24 U.S. states, to inform the client’s efforts to enter additional markets. Our work enabled the client to target market expansion efforts more effectively and to achieve higher win rates with targeted procurement opportunities.
  • Assessed strategic options and developed a plan for a leading provider of care services for underserved populations to enter the rapidly evolving mental health provider/high-needs population management space. Equipped with our analysis, including a fact-based recommendation for prioritized entry options and tactical requirements for successful implementation, the client is pursuing market entry.
  • Collaborated with corporate medical management to codify and systematically implement an intensive case management program with a focus on complex populations — e.g., intellectual and development disabilities (I/DD), SMI, high-risk DM, high-risk perinatal — with integrated behavioral health management, service coordination and support across multiple state Medicaid health plans.
  • Developed a state-by-state geographic expansion plan for a provider of geriatric psychiatric inpatient and outpatient services, and completed in-depth research for selected priority markets. The client successfully expanded into priority geographies and, to enable continued growth, contracted with L.E.K. to evaluate additional markets.
  • Completed commercial due diligence of a managed care behavioral health company, including evaluation of market size and segmentation; trends in Medicaid contracting of behavioral health, and impact of managed care; reimbursement dynamics and trends; the competitive environment; and the target’s contract win-loss history. The client elected not to pursue investment due to issues identified during the diligence process.
  • Conducted assessments of the intellectual and development disabilities landscape in multiple states on behalf of a leading I/DD provider, including assessments of the patient population, the regulatory environment, managed care, reimbursement, institutional versus community-based settings and the underlying cost to serve. Our efforts helped refine the client’s growth strategy to incorporate a greater near-term focus on organic growth and a medium-term focus on acquisitions.
  • Completed market and commercial due diligence of two providers of residential and outpatient substance abuse treatment and psychiatric care. Successful acquisitions served as a platform investment into the substance abuse and behavioral health treatment sectors, and the investors have subsequently completed add-on investment in the eating disorder and substance abuse space.
  • Assessed the U.K. mental healthcare market and competitive landscape for a U.S. provider of inpatient and outpatient behavioral health, substance abuse, eating disorder, and PTSD and trauma treatment services. The client subsequently made two major acquisitions of behavioral health providers in the U.K.
  • Developed a comprehensive operational and financial performance improvement plan for the behavioral health division of a leading provider of specialty healthcare services to Medicaid agencies, state and local governments, health plans, employers, and labor trust groups.
  • Developed integrated pathways for a multi-location provider of secure/semi-secure mental health services. Our work included collaborating with clinical and operational teams to define areas of unmet need in the local/regional health economies, identifying how the estate could be reconfigured to support integrated pathways across multiple settings, and offering potential for patients to be re-integrated into the community.
  • Validated a need for a new neuro-rehab facility in a specific area of the U.K., based on analyses of local demand dynamics, referral pathways and the competitive landscape. Supported management in developing the business case for the new investment.

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