Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity

The behavioral health industry has seen immense growth over the last decade, with a substantial portion of that growth driven by private equity investment. Firms have targeted mental health and addiction services, including outpatient and inpatient therapy, intellectual and developmental disability treatment, psychiatric hospitals, methadone clinics, and detox centers.

Case studies examining Sequel Youth and Family Services, owned by Altamont Capital Partners, and Community Intervention Services, owned by H.I.G. Capital, point to potential risks of private equity investment in behavioral health. Firms’ tendency to demand outsized returns in a sector that is already vastly underfunded, and serves vulnerable populations, raises serious concerns about the private equity model’s potential impact on patient care.

Full report available here.

Key Points

• The behavioral health industry has seen substantial investment by private equity firms in recent years, particularly in firms specializing in autism, eating disorders, and addiction treatment.
• Opportunities for consolidation combined with increased access to care due to expanded coverage, more money flowing into the sector, and changing attitudes about mental health treatment have made behavioral health attractive to investors.
• Private equity investment carries substantial risk for behavioral health services, including the potential for inadequate staffing or reliance on untrained and unlicensed staff, pressure on physicians to provide unnecessary and costly services, or abuse of federal funding programs at the expense of patient care.
• Case study: Sequel Youth and Family Services, owned by Altamont Capital, has come under scrutiny for numerous instances of abuse and neglect at its residential treatment facilities for youth.
• Case study: Community Intervention Services, owned by prolific prison investor H.I.G. Capital, was sued for violating the False Claims Act by fraudulently billing Medicaid for mental health care services provided to patients by unlicensed, unqualified, and unsupervised staff members.

Full report available here.