Welcome to The Census, your weekly roundup of what matters in behavioral healthcare.

It’s written by me, Shân. I’m a business analyst, here to help you stay ahead of your competition. 

Your top stories today: 

1. HEADLINES: Our breakdown of PitchBook’s PE in healthcare report and the digital vs residential ED treatment toss-up.

2. Money Moves: $20M for a behavioral health IT initiative, $18M for a hybrid mental health platform, and more. 

3. On Our Radar: Providers are getting teens to help design treatment centers. They’re a hit. 

4. Catch Up Quick: This week’s top stories in less than a minute.

Let’s go.

P.S. This mail is skimmable so your jumpy brain can find the headlines that interest you most. Skim away.

Reading time: ~4.8 minutes.

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💰 A TL;DR of PitchBook’s Q4 2023 Healthcare Services Report

Fewer, smaller deals and a plummet in exits marked 2023.

Here’s what you need to know:

📉 Overall, PE deal activity was depressed with 788 healthcare services deals closed in 2023.

• This is a ~16% decline from 2022 and a ~29% decline from 2021

There were also significant changes in the size and structure of deals getting across the finish line.

• Average deal size shrunk as large deals remained extremely difficult to finance 

• Private credit lenders stepped in to some extent but allowed only very conservative levels of leverage (3x to 4x EBITDA)

• While the absolute number of “growth” deals (minority equity transactions) did hit an all-time high, most of these were related to financial restructuring rather than accelerating growth

💸 PE healthcare exits hit record lows. Only 39 (!) exits were recorded, a whopping 22% below the next-lowest year on record, 2019. 

• Some of this backlog will be resolved when interest rates fall in the second half of 2024

• But the number of large platforms in need of an exit in the next couple of years exceeds the number of likely buyers

Let’s shift to the behavioral health space specifically:

As you can see above, PE deals for diversified mental health services picked back up after a dismal 2022.

• But the number of all other deals declined, with the SUD and ED treatment spaces experiencing the sharpest drops

🥀 2024 looks to be even less rosy: 

• Investors are likely to be more cautious about entering any provider categories that serve vulnerable populations, including high-acuity behavioral health

• Thanks to headline risk and liquidity problems (at least until interest rates drop), the largest PE firms may step back from investing in providers altogether

Some good news, though, for applied behavior analysis therapy:

• ABA activity is expected to accelerate this year as 2023’s astronomical valuations reset

• School-based mental health providers are also piquing investors’ interest as a complement to center-based ABA therapy investments

Read the full report here. 

🤔 The Residential vs Virtual Debate for Eating Disorder Treatment 

Over the last few months, the ED industry has seen a string of residential closures — and a rise in digital options. 

What’s happening: The ED space faces a unique problem: patients want to recover, but they don’t want to gain weight. In addition:

• There’s much dispute between providers and payers over the amount of time patients should be in residential treatment

• Care that takes people out of their day-to-day environments and places them in artificially secure spaces is, well, questionable when it comes to effectiveness

The result: A lot of relapses and people needing to go back into treatment.

So what’s next? As we reported last week, digital ED treatment solutions are proving effective — and popular, with both patients and payers.

This does not mean residential ED treatment facilities are no longer necessary. But we're likely to see:

• An influx of both digital and hybrid options

• Further residential closures, with the more specialized residential centers holding ground

Go deeper here. 

Money Moves

Funding rounds, mergers, & partnerships

🧠 $18M for mental health startup Headlight, a hybrid provider that just hired an Amazon exec as CEO.

💵 RehabPath invests $1M in its move to Recovery.com, to connect more patients with treatment providers.

✨ A $3B merger has Virgin Pulse & HealthComp rebranding as Personify Health.

💰 A PE injection will allow UK-based scaleup TalkLife, a global online peer support community for mental health, to expand in North America.

🤝 Syra Health announced a partnership for a federal contract valued at $75B, and also landed a third active government contract in the state of Virginia. 

💻 A new $20M Behavioral Health IT Initiative will be driven by SAMHSA & ONC as they pair up on a 3-year program.

🏥 Fidelis Care & Cityblock will partner to bring comprehensive care to Medicaid members in New York.

🤝 Everside Health & Marathon Health will merge to offer primary care, mental health, and occupational health to a combined base of 630 clients.

📈 KeyCare & WellSpan Health will expand their partnership to offer virtual behavioral health care in Pennsylvania. 

On Our Radar

What we’re watching this week 

🏆 Teen-Designed Treatment Centers Are Here — And They’re a Hit

An award-winning new teen center features biophilic design, autonomy of space, and quirky color palettes — not phrases you’d usually associate with an outpatient provider.

But that’s exactly the point. 

There’s a lot of talk about modernizing + personalizing the design of treatment spaces, with very little action (yes, we know, cost). 

But new providers are putting their money where their mouths are. And if you’re in the teen behavioral health space, this is not a movement to ignore.

What’s happening: Stella’s Place, a Toronto-based behavioral health provider, turned an old candy factory into an outpatient center with the design help of teens themselves. 

Stella's Place also brought on teens as ongoing partners to deliver and evaluate their behavioral health programs.

We’re not saying this level of teen involvement is feasible for all providers. But it’s a no-brainer that creating genuinely teen-centric treatment centers is likely to — you guessed it — win over the teens.

➡ Our takeaway from this is that adolescent providers should regularly seek out, and incorporate, feedback from teens, in an authentic way.

Because if you don’t, others will. And we know where teens will choose to go. 

Catch Up Quick

This week’s hot headlines. 

🏃 $1B merger called off after Pennsylvania-based behavioral health nonprofits Merakey and Elwyn “mutually agreed to walk away.”

📝 Addiction treatment in state prisons will be bolstered if a new bill is passed to authorize more funding for training of state officials. 

❤️‍🩹 Related: Following California’s success, a slew of states are pursuing pre-release Medicaid for incarcerated people as a means to address SUDs. 

💊 A new MDMA-assisted therapy drug was granted priority review, meaning MDMA could beat ketamine to be the first FDA-approved psychedelic-assisted therapy.

🚀 Ex-Vertava Health CEO launched a PE-backed national mental health platform focused on bridging the gap between outpatient and in-facility care.

👀 SUD providers will soon be subject to more rigid confidentiality protections, per a new rule designed to ease the integration of behavioral health information with other medical records. 

🧠 Mindful Therapy Group to expand into the Arizona market. 

⚒️ Persistent Systems & Microsoft have launched an AI-powered population health management solution to drive value-based care.

🤖 Related: Some experts propose that AI healthcare tools should be regulated based on their ability to achieve patient outcomes.

✍️ Ambient AI scribes show early promise in reducing clinicians’ burden. 

👀 BHB’s five mental health companies to watch in 2024. 

🤔 Are direct-to-consumer models of healthcare the future? Some believe so. 

🧑‍🤝‍🧑 Outcomes-focused behavioral healthcare firm Octave welcomed two seasoned healthcare leaders to its Board.

🌿 Cannabis-related emergency department visits increased ~50% between 2019 and 2020, per a new study. 

🥊 There’s been (surprise!) a notable uptick in payer/provider disputes each year; here’s how CFOs can address the challenge. 

🏆 Presence, a provider of teletherapy services for schools, made Fortune's Impact 20 list.

💉 New GLP-1 study links obesity and diabetes drugs to lower depression risk. 

That’s it for this week, see you next Wednesday!

- Shân