Two PE-owned behavioral health companies initiate closures, layoffs in Florida and Ohio

In the first month of 2023, two major private equity-owned behavioral health chains have announced closures and layoffs.

Private equity-backed Delphi Behavioral Health Group disclosed in January, in compliance with the Worker Adjustment and Retraining Notification (WARN) Act, that it will be laying off 133 workers across four facilities in Florida[1] in preparation to ultimately close those facilities.[2] According to Behavioral Health Business, customer service employees at Delphi “state that the company is closing down major portions of its operations.”[3]

In the same month, another private equity-backed behavioral health provider, Mindpath Health, announced that it will shutter its offices in Ohio and lay off an undisclosed number of employees.[4]

The closures represent a troubling development in private equity’s spate of behavioral health acquisitions in recent years, and raise questions about how the typical private equity playbook of fast growth using high levels of debt may ultimately be an untenable strategy for which workers and patients pay the price.

Delphi Behavioral Health – Capital Southwest Corp.

According to the company’s website, Delphi Behavioral Health specializes in individualized addiction treatment, offering drug and alcohol detox and treatment centers.[5] Delphi has 13 locations across California, Florida, Maryland, Massachusetts, and New Jersey.[6]

Delphi has been a private equity-backed company since its inception. Blue Ox Healthcare Partners was an original founding investor in Delphi when it first formed in 2014. In 2017, Blue Ox exited the investment, selling its stake to The Halifax Group. At the time, the company had 11 recovery centers in Florida, California, and Maryland.[7]

In 2018, Delphi merged with Summit Behavioral Health, adding facilities in New Jersey, Massachusetts, and Pennsylvania.[8] Halifax exited the investment in 2020, and the company is currently owned by private equity firm and business development company, Capital Southwest Corp.[9]

According to Capital Southwest’s 2022 Q3 financial statements, debt placed on Delphi around the time of its acquisition is set to mature in April 2023.[10] It is unknown if the company’s debt burden has contributed to the decision to lay off workers and close facilities.

Mindpath Health – Centerbridge Partners, Leonard Green & Partners

Mindpath Health, a mental health company owned by Centerbridge Partners and Leonard Green & Partners, has announced that it will close its Ohio offices and lay off an undisclosed number of workers.[11]

According to its website, Mindpath has 100-plus locations across Arizona, California, Florida, Minnesota, North Carolina, South Carolina and Texas.[12] The four Ohio locations that are set to shut down are located in the greater Columbus and Cleveland areas.[13]

Mindpath acquired the Ohio locations in December 2021, meaning it held onto them for just a little over two years before shutting them down.[14]

Centerbridge and Leonard Green acquired Mindpath in 2021 through their platform company Community Psychiatry,[15] which the firms had acquired from another private equity firm, New Harbor Capital, in 2020.[16]

Both Centerbridge and Leonard Green have a record of aggressive financial policies at the healthcare companies they own, including leveraging debt onto healthcare providers to pay themselves and other shareholders hundreds of millions of dollars in dividends.[17]

Private equity’s behavioral health track record

Behavioral health services, especially for substance use disorders, are in high demand across the United States due a shortage of behavioral health clinicians, expanded coverage for mental health and substance use disorder services, and the opioid overdose crisis.[18] Private equity firms have been capitalizing on this demand in recent years, as well as the fragmented behavioral health market that makes it ripe for consolidation.[19]

In a recent interview, PESP research director Eileen O’Grady told Marketplace, “the fragmented [addiction treatment] industry could use some standardization and investors might help.” She went on to caution, however, about the lack of transparency that characterizes this industry: “more than other areas of health care, addiction medicine or mental health treatment are very, very opaque in the same way that private equity as an industry is very opaque. Couple those together, you have basically a black box.”[20]

Private equity firms have a troubling track record in investing in behavioral health where cost-cutting tactics such as reducing staff, relying on unlicensed staff, and failing to maintain facilities have been shown to create harmful outcomes for patients.[21]

See our reports on private equity in behavioral health: The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth (February 2022); Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity (September 2020).

The layoffs and impending closures by Delphi Behavioral Health and Mindpath are cause for concern in an industry that already is struggling to meet the demand for mental health and addiction treatment in the US. In addition to the negative impacts of job loss, closures could lead to disruptions in care for current patients and further reduce access to care for those who are in great need.

[1] Larson, Chris. “Delphi Behavioral Health Shutters All Florida Facilities, Appears Set to Close All Operations.” Behavioral Health Business, January 25, 2023. https://bhbusiness.com/2023/01/25/delphi-behavioral-health-shutters-all-florida-facilities-appears-set-to-close-all-operations/.

[2] Bojnansky, Erik. “Delphi Behavioral Health Group to Shut down 4 Addiction Treatment Centers, Lay off 100-plus Workers.” South Florida Business Journal, January 24, 2023. https://www.bizjournals.com/southflorida/news/2023/01/24/fort-lauderdale-company-layoff-100.html.

[3] Larson, Chris. “Delphi Behavioral Health Shutters All Florida Facilities, Appears Set to Close All Operations.” Behavioral Health Business, January 25, 2023. https://bhbusiness.com/2023/01/25/delphi-behavioral-health-shutters-all-florida-facilities-appears-set-to-close-all-operations/.

[4] Chris Larson, “Mindpath Health to Leave Ohio, Lay Off Workers as Part of Restructuring,” Behavioral Health Business, February 6, 2023. https://bhbusiness.com/2023/02/06/mindpath-health-to-leave-ohio-lays-off-workers-as-part-of-restructuring/.

[5] Delphi Behavioral Health Group. “About Delphi.” Accessed February 6, 2023. https://delphihealthgroup.com/about-us/.

[6] Delphi Behavioral Health Group. “Our Treatment Centers.” Accessed February 3, 2023. https://delphihealthgroup.com/treatment-centers/.

[7] Partners, Blue Ox Healthcare. “Blue Ox Healthcare Partners Exits Delphi Behavioral Health Group.” PR Newswire, October 11, 2017. https://www.prnewswire.com/news-releases/blue-ox-healthcare-partners-exits-delphi-behavioral-health-group-650415863.html.

[8] HMP Global Learning Network. “Delphi Merges with Summit Behavioral Health,” April 27, 2018. https://www.hmpgloballearningnetwork.com/site/behavioral/article/finance/delphi-merges-summit-behavioral-health.

[9] Larson, Chris. “Delphi Behavioral Health Shutters All Florida Facilities, Appears Set to Close All Operations.” Behavioral Health Business, January 25, 2023. https://bhbusiness.com/2023/01/25/delphi-behavioral-health-shutters-all-florida-facilities-appears-set-to-close-all-operations/.

[10] “SEC Form 10-Q – Capital Southwest Corporation.” SEC, September 30, 2022. Pg. 18, https://www.sec.gov/Archives/edgar/data/17313/000001731322000097/cswc-20220930.htm.

[11] Chris Larson, “Mindpath Health to Leave Ohio, Lay Off Workers as Part of Restructuring,” Behavioral Health Business, February 6, 2023. https://bhbusiness.com/2023/02/06/mindpath-health-to-leave-ohio-lays-off-workers-as-part-of-restructuring/.

[12] Mindpath Health. “Home.” Accessed February 8, 2023. https://www.mindpath.com/; Mindpath Health. “Locations.” Accessed February 8, 2023. https://www.mindpath.com/mindpath-locations/.

[13] Mindpath Health, accessed February 7, 2023. https://www.mindpath.com/mindpath-locations/ohio/.

[14] “Mindpath Health Acquires Ohio-Based Vertava Health,” Mindpath Health press release, December 6, 2021, https://www.mindpath.com/news/mindpath-health-acquires-ohio-based-vertava-health/.

[15] Kyle Coward, “Community Psychiatry Doubles Facility Count, Becomes Bi-Coastal With Latest Acquisition,” Behavioral Health Business, May 11, 2021. https://bhbusiness.com/2021/05/11/community-psychiatry-doubles-facility-count-becomes-bi-coastal-with-latest-acquisition/.

[16] “New Harbor Capital is pleased to announce the sale of Community Psychiatry Management, LLC to Centerbridge Partners,” Paragon Ventures press release, December 2020. www.paragonventures.com/market-pulse-posts/new-harbor-sells-community-psychiatry-to-centerbridge-partners/ ; “Community Psychiatry: acquisition by LGP and Centerbridge approved,” EU Law Live, December 16, 2020. http://eulawlive.com/community-psychiatry-acquisition-by-lgp-and-centerbridge-approved/

[17] Eileen O’Grady, “Private Equity Firms Reaped Billions of Dollars in Debt-Funded Dividends from Healthcare Companies in 2021,” Private Equity Stakeholder Project, January 5, 2022. https://pestakeholder.org/news/private-equity-firms-reaped-billions-of-dollars-in-debt-funded-dividends-from-healthcare-companies-in-2021/. ; Eileen O’Grady, “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag,” Private Equity Stakeholder Project, November 2022. https://pestakeholder.org/reports/how-private-equity-raided-safety-net-hospitals-and-left-communities-holding-the-bag/

[18] “The Psychiatric Shortage: Causes and Solutions.” National Council for Mental Wellbeing, 2018. https://www.thenationalcouncil.org/wp-content/uploads/2022/02/Revised-Final-Access-Paper.pdf; Farmer, Blake. “Private Equity Investment Is Flooding into Addiction Treatment. Is That a Good Thing?” Marketplace, January 25, 2023. https://www.marketplace.org/2023/01/25/private-equity-investment-is-flooding-into-addiction-treatment-is-that-a-good-thing/.

[19] Vector Medical Group and Epstein Becker Green. “Private Equity’s Push Into the Mental Health Space.” Accessed October 25, 2022. https://vectormedicalgroup.com/app/uploads/Q4-2021-Industry-Brief_Final.pdf.

[20] Farmer, Blake. “Private Equity Investment Is Flooding into Addiction Treatment. Is That a Good Thing?” Marketplace, January 25, 2023. https://www.marketplace.org/2023/01/25/private-equity-investment-is-flooding-into-addiction-treatment-is-that-a-good-thing/.

[21] See our reports on private equity in behavioral health: The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth (Feb 2022); Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity (September 2020).