The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth

In a new report, the Private Equity Stakeholder Project examines private equity investment in a few key areas: the troubled teen industry, for-profit foster care, services for youth with intellectual and developmental disabilities (I/DD), and autism services.

See the report: “The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth”

Several of the largest private-equity-owned companies operating in these industries have had track records of widespread neglect and abuse of youth under their care—including excessive use of physical restraints on children with disabilities (Advoserv – GI Partners), squalid living conditions at group homes and foster care facilities (Sequel Youth & Family Services – Altamont Capital Partners), and neglect that has led to numerous deaths (The Mentor Network – Centerbridge Partners, the Vistria Group).

Despite the horrific conditions at these companies and the increasing scrutiny, private equity firms have in some cases managed to reap substantial profits and investment in these industries has continued to grow rapidly.

There has been increasing scrutiny and legislative action to address these issues. Last year California banned the practice of sending foster youth and teens charged with crimes to out of state facilities as a direct result of a years-long investigation by state regulators into PE-owned foster care company Sequel Youth & Family Services. In October, Rep. Ro Khanna (D-CA) and Sen. Jeff Merkley (D-OR) announced a plan to introduce federal legislation to regulate youth residential treatment centers.

The full report is available here.

Key Points

• Private equity firms are increasingly investing in behavioral services for children and adolescents, including services for youth with intellectual and developmental disabilities, services for youth in foster care, services for youth in the juvenile justice system, troubled teen programs, and autism services.
• Private equity has a troubling track record in investing in youth behavioral services. The private equity business model, which focuses on outsized returns over short time horizons, may prioritize profit over the well-being of children. Cost-cutting tactics at private-equity-owned youth behavioral companies, such as cutting staff, relying on unlicensed staff, and failing to maintain facilities, can lead to abuse, neglect, and unsafe living conditions for youth under the care of those companies.
• Despite horrific conditions at some youth behavioral health companies, their private equity owners have in some cases reaped massive profits.
• This report examines several key areas of youth behavioral services:

• • Companies in the troubled teen industry (TTI), including Aspen Education Group owned by Bain Capital; and Family Help & Wellness owned by Trinity Hunt Partners.
  • For-profit foster care companies, including the Mentor Network owned by Centerbridge Partners; and Sequel Youth & Family Services owned by Altamont Capital.
  • Services for youth with intellectual and developmental disabilities (I/DD), including AdvoServ (aka Bellwether Behavioral Health) owned by GI Partners and later by Wellspring Capital Management.
  • Autism services companies, which have been increasingly bought up by private equity firms in the last several years.

• Appendix A includes a list of youth behavioral services companies owned by private equity firms as of December 2021.

The full report is available here.