States move to regulate private equity-backed autism therapy providers

Policymakers take steps to address private equity takeover of applied behavioral analysis and squeeze on Medicaid budgets

Applied behavior analysis (ABA) is the most treatment for autism. As screenings increase in the US, more children are being diagnosed with autism, leading to increasing state and federal spending on autism services. to take advantage of growing spending on autism services, specifically ABA. because they are scalable through increasing the number of clients or client hours at each site, and through acquiring individual practices or groups of practices.

As outlined in an April 2026 PESP report, private equity’s incursion into the ABA industry represents some risk to patients, families, and providers through a focus on profit. Private equity-backed ABA providers may seek to reduce costs by simplifying treatment plans or reducing staff training and supervision. To increase income, ABA providers may pressure parents to agree to 30 or more hours a week of treatment, whether or not that is best for the child. Audits of Medicaid ABA spending have unearthed widespread billing and compliance issues, ranging from incomplete recordkeeping to billing for as many as 65 hours of therapy in one day, and millions of dollars of overpayments to providers.

In the context of real growing demand for autism treatment while the federal government cuts Medicaid budgets, policymakers may be interested in finding ways to ensure that money spent on ABA is benefiting patients and families, not enriching private equity owners or their investors.

ABA services are currently regulated through professional licensure for individual providers, Medicaid billing rules, and facility or organizational oversight.

Federal regulation

At the federal level, there is no unified regulatory system for ABA providers or facilities. Under Early and Periodic Screening, Diagnostic, and Treatment benefits, states must cover medically necessary services for children under 21, including autism-related care. ABA is one treatment modality for Autism Spectrum Disorder that is covered by Medicaid, and by 2022 all state Medicaid programs included coverage for ABA.

There are federal and state requirements for documentation and billing for services. As noted above, audits by the HHS Office of Inspector General have uncovered significant issues surrounding improper payments and inadequate documentation.

State regulation

States have taken a variety of approaches to ABA regulation, including professional licensure, organizational or facility licensure, and state Medicaid payment or treatment limits.

Professional licensure

Starting in 2009, states began regulating behavior analysts, the professionals who administer ABA. As of June 2026, 41 states require professional licensure for individual providers.

Organizational and facility regulation

Some states also regulate at the organization or facility level. Minnesota, for example, has moved toward direct organizational licensure, requiring that providers that contract with the state healthcare program for people under age 21 with autism spectrum disorder must have a provisional license, which grants inspection authority, ownership disclosure, and that ties Medicaid participation to licensure status.

Massachusetts and Indiana require agencies providing ABA to be accredited in order to receive state Medicaid payments. Massachusetts was the first state to institute such a rule, requiring MassHealth’s managed care entities to contract only with accredited ABA providers. Center-based providers must be accredited by January 1, 2027 and all others must be accredited by January 1, 2028. Indiana announced its rule in January 2026, and requires groups enrolled in the state’s Medicaid program to have begun the accreditation process by August 1, 2026.

Pennsylvania requires practitioners to apply to operate an Intensive Behavioral Health Services (IBHS) agency. IBHS agencies are required to meet specifications, including organizational structure, policies and procedures; staff requirements and qualifications; staff training; the format and contents of client assessments and treatment records; record retention; and quality improvement requirements and annual reports.

Colorado recently announced a similar, but slightly different approach, requiring licensure requirements for facilities. On June 2, 2026, Colorado Governor Jared Polis signed HB26-1425 into law, specifically regulating ABA providers. The governor explained that before the law was passed, “State agencies had been largely unable to take action to address complaints regarding care quality and child safety in these clinics” because most ABA providers “do not fit neatly within a ‘day treatment’ license type, administered by the Department of Human Services.” The Colorado legislation requires professional licensure for ABA providers and directs the Department of Human Services to create licensure requirements for facilities that treat children. As Rep. Kyle Brown articulated in a statement, this legislation adds to what many other states are doing: “The vast majority of states regulate ABA providers, and this bill ensures that both providers and facilities are operating within the law to keep our children safe.”

State Medicaid limits

Several states have instituted or are considering instituting caps for payment or number of hours for treatment. New York SB S5107, currently in the Senate Insurance Committee, would limit ABA treatment to 680 hours of treatment per calendar year. In January 2025, Nebraska’s Department of Health and Human Services instituted a 30-hour-per-week cap for Medicaid reimbursement for ABA services.

Indiana’s Family and Social Services Administration initially announced that it would limit Medicaid reimbursement for comprehensive ABA services to a maximum of 30 hours per week for three years. In February 2025, the agency established three tiers of services based on “levels.”

Policy options to specifically address private equity ownership of ABA providers

States may want to consider policies that help address some of the specific concerns surrounding private equity ownership of ABA providers. A May 2026 article in Health Affairs both describes those specific issues and proposes regulations that could help improve oversight of ABA services and private equity’s role.

Yashaswini Singh, Corrie Mook, Jared Perkins, Nathan Hostert, and Daniel R. Arnold, the authors of the Health Affairs article,noted that, in general, private equity investment “alters workforce composition and clinician turnover,” and that the rapid growth of private equity-owned ABA services can lead to higher costs and limit access to care. The authors found that in Colorado, “PE-backed centers accounted for half of the increase in billable hours in 2024, prompting concerns over unnecessarily intense treatments that lack clinical benefit.”

To allow for greater oversight of private equity-backed ABA providers, the authors recommend:

• Generating higher quality Medicaid data with more details, including state identifiers;
• Requiring ownership transparency for provider organizations; and
• Enforcing existing anti-kickback statutes, including to investor-backed management companies.

The authors also suggest that policymakers engage with patient advocacy groups and community organizations to provide insight into how to refine reforms more quickly to avoid unintended consequences.