While overall M&A healthcare deals saw a dip in Q1, behavioral health was the only subsector where the strategic deal volume grew.
According to a KPMG report the strategic deal volume grew by 17% in the behavioral health space.
“So whether it’s talk therapy, or more intensive behavioral health or IDD, work or etc. There seems to be a desire on folk’s part to continue to aggregate kind of fragmented assets and bring them together,” Dr. Ross R. Nelson, National Healthcare Strategy Leader and Principal at KPMG, told Behavioral Health Business.
According to the report the overall health care industry saw a 13% decline in strategic health care deals. Private equity deals also fell 50% from Q4 2021 to Q1 2022, and the volume of health care deals declined by 34% quarter-over-quarter.
The report notes the geopolitical situation, supply chain issues, valuations “softening” leading to a mismatch of expectations between buyer and seller and rising interest rates leading to less leverage for PE have all contributed to this decline.
Telehealth’s role in behavioral health growth
Nelson said telehealth adoption in the behavioral health sector has led to continued access to care for patients.
“There has not been the level of disruption in-person visits as some of the other kinds of specialties,” Nelson said.
According to KPMG analysis based on Medicare Fee-For Service (FFS) claims for CPT codes approved by CMS for telehealth place of service reimbursement, in 2019 telehealth accounted for 1.7% of behavioral health claims, compared to 0.2% of total claims. During the peak of COVID-19 in April 2020, 59.1% of telehealth claims were telehealth visits, and 36.8% of total claims were telehealth.
Even after the height of the pandemic behavioral health continues to see high telehealth claims numbers. In March of 2021, 43.4% of behavioral health claims were telehealth, compared to just 10.4% of total claims.
Nelson noted that commercial reimbursement is another key factor driving M&A in the behavioral health industry.
“Payers are willing to pay more if they see value added being delivered by providers to help manage comorbidities and mental health, because mental health plays such a large role in the overall health of patients,” Nelson said.
“So we are seeing some of the assets that are being aggregated, get reimbursed better by payers as they look to take more of a holistic view and management of the patient.”
Behavioral health is not completely immune to challenges facing other sectors in healthcare. Clinical costs have increased over the last year and finding qualified labor has been an issue across the board in healthcare. This could impact the industry for the rest of 2022.
“I think, in behavioral health and other sectors like that, people are pressure testing their ability to grow, or think[ing] about their growth aspirations, and how achievable those really are based on the availability and cost of labor,” Nelson said.
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