CenterPointe Behavioral Health System is a leader in behavioral health and addiction treatment services. The company  provides a comprehensive continuum of care, operating inpatient and outpatient psychiatric and addiction treatment programs in the Midwest that serve a wide range of patient populations. Harris Williams recently advised CenterPointe on its sale to Acadia Healthcare Company.

Here, professionals from the Harris Williams Healthcare & Life Sciences Group share insights on what made CenterPointe an exceptional investment opportunity, as well as their advice for buyers and investors interested in behavioral healthcare businesses. 

What makes inpatient behavioral healthcare an appealing sector to buyers and investors?

Knier: We are in the midst of a mental health crisis. Nationwide, nearly one in five people are living with a mental health condition and about 10 percent of youth in the U.S. have severe depression. ⁱ Unfortunately, this trend was accelerated by COVID-19 as isolation and increased stress led to an uptick in depression and substance use. 

The growing need for mental health services has resulted in significant unmet demand. Overall, 57 percent of adults with a mental illness and 60 percent of youth with depression receive no mental health treatment. ⁱⁱ  There are currently only 11.7 psychiatric beds per 100,000 people in the U.S. relative to an estimated need of 55 beds per 100,000 people. ⁱⁱⁱ  Direct patient demand for behavioral health services far outpaces supply. Hospital referral trends are also strong and rising as many hospitals are not well equipped to treat patients arriving in the emergency room with acute behavioral conditions. In sum, there’s a huge growth opportunity for companies operating in this sector. 

Clark: Behavioral health services are also strongly supported by both government and commercial payors given the growing need and unmet demand. This results in stable reimbursement rates and a significant number of payors going in-network for these services.

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^{i https://mhanational.org/issues/state-mental-health-america
ii https://mhanational.org/issues/state-mental-health-america
iii https://www.treatmentadvocacycenter.org/evidence-and-research/learn-more-about/3696 , https://health.mo.gov/}

What made CenterPointe particularly attractive to buyers?

Knier: CenterPointe has substantial density in an attractive market. It is the largest dedicated behavioral health provider in Missouri, where Certificate of Need ("CON") laws provide barriers to new market entrants. By providing high-quality services, CenterPointe delivers positive patient outcomes and enjoys strong patient satisfaction. This reputation drives entrenched referral relationships as well as the opportunity for consistent rate increases across payors. 

Mahoney: CenterPointe provides a full continuum of care spanning inpatient psychiatric treatment, residential treatment, partial hospitalization programs, intensive outpatient programs, and outpatient services. This allows the company to treat a wide variety of mental health conditions and acuity levels. CenterPointe’s integrated network provides a progressive step-down model of care that keeps patients within its system at progressively lower acuity levels over an extended period of time, which results in low recidivism after discharge and makes the company a provider of choice for payors. 

Clark: To meet growing unmet demand and provide a path to strong organic growth, CenterPointe continually invests in expansion projects to increase its number of inpatient and residential beds and expand its outpatient programs within the communities it serves. This expansion plan provided buyers and investors with a clear roadmap to the company’s next phase of growth. 
 

What advice do you have for buyers and investors evaluating this sector?

Knier: Winning platforms focus on providing the highest quality care to patients through a variety of programs that enable a breadth of service options to their communities. They are assiduous about tracking outcomes and the actual value of care so that they can show strong clinical results. This discipline could increase in importance over time, if the industry begins to explore value-based-care models. 

Clark: Given the unmet demand across the sector, capacity drives growth. Platforms that invest in projects to expand availability of services will benefit from accelerating demand from patients and payors. Investment could mean funding construction to add new beds. Less capital-intensive options could include re-purposing unused capacity in an existing hospital or community facility for behavioral health services. Regardless of strategy, winning platforms should be able to provide buyers and investors with a tangible growth story to underwrite. 

In addition to covering behavioral health, the Harris Williams Healthcare & Life Sciences Group has deep expertise in a wide range of subsectors. Learn more here: Healthcare & Life Sciences