Within the behavioral health sector, it has been a bumpy 12 months for autism treatment providers. But it’s turning out to be somewhat of a tumultuous year for those in the substance use disorder (SUD) space as well.
SUD dealmaking fell below pre-pandemic levels in Q1, according to a recent report by M&A advisory firm Mertz Taggert. In fact, in the first quarter of the year, there were four SUD deals – only one-third of the deals compared to 2022’s final quarter.
“There are fewer buyers and less demand in addiction treatment,” Kevin Taggart, managing partner at Mertz Taggart, said in the report. “The buyer landscape has shifted. Many traditional buyers have paused for various reasons, and those who are buying are being very disciplined in their acquisitions.”
There have also been some major, headline-grabbing failures. Notably, private equity-backed addiction provider Delphi Behavioral Health Group closed all but three of its centers and filed for Chapter 11 bankruptcy.
Additionally, more questions loom about the future of providers offering virtual medication-assisted treatment (MAT) as the Drug Enforcement Administration (DEA) floats a proposal requiring an in-person component to care.
Still, many providers are innovating and growing their businesses this year, and some have even managed to raise venture capital funding during a relatively lackluster investment period.
Behavioral Health Business compiled a list of five providers to closely monitor this year and into 2024.
Home is where behavioral health is
Aware Recovery Care is changing the SUD care paradigm with its in-home approach to treatment. The organization pitches this approach to make care more convenient, flexible and personalized, while also including the family unit in recovery.
Today, most SUD treatment is provided at a facility, which means Aware Recovery is blazing the trail of this type of treatment.
“Managing an in-home addiction treatment program is challenging — [it’s] definitely going against the grain,” Maks Danilin, senior vice president for growth at Aware Recovery Care, said during an interview at the BHB VALUE 2022 event.
The organization also differentiates itself because of its focus on value-based care. Roughly 80% of its revenue comes from value-based care arrangements.
Despite several economic headwinds, the Wallingford, Connecticut-based provider has also managed to raise a significant amount of money this year. In June, the company announced that it closed a $35 million Series B funding round. This broke down to $25 million in equity and $10 million in debt.
And with that funding, the organization has ambitious plans. It currently operates in 11 states but plans to add more to its list. It also plans to expand in five of its existing state markets in 2023.
The new funding and expansion plans come amid a C-suite shakeup for the company. In 2022, seven C-suite executives left the company and five new members joined. This includes the company’s CEO, Brian Holzer, who joined in April 2022.
BHB is watching Aware Recovery to see if it can establish a pathway for in-home addiction care. It will also be worth following the company to see what the relatively new leadership team does with the new infusion of capital and growth plans.
‘The Mayo Clinic of addiction treatment’
Caron Treatment Centers is a nonprofit addiction treatment provider. It has differentiated itself through its research efforts and diversified service offerings.
Founded in 1957, Caron is the oldest provider on this list. The Wernersville, Pennsylvania-based company offers inpatient, outpatient, MAT and detox services. It operates in Pennsylvania, Floria, Washington, D.C., Georgia and New York.
In 2022, the organization announced the opening of The Fran and Doug Tieman Center for Research. The new facility is dedicated to studying SUD, including finding genetic markers for an increased addiction risk, relapse prediction and repurposing FDA-approved medications for other conditions.
“Research done well requires proper funding, precision, patience and diligence,” Dr. Joseph Garbely, the former chief medical officer and executive vice president at the Caron Treatment Centers, said in a statement. “By making this investment, we can substantially improve our understanding of relapse, increase treatment options and identify tools and markers to make addiction a significantly more preventable and treatable disease.”
Garbely previously told BHB that he sees Caron as the “Mayo Clinic of addiction treatment.”
In addition to research, the organization has also grown in its offerings. It opened the Keele Medical Center, which includes 40 beds for residential treatment, a medical detox unit, a program for seniors and medical education.
While Caron is growing its research opportunities, the company has had some leadership changes in the past year. In February, the company announced that CEO Bradley Sorte was stepping down.
Caron COO Kristine Bashore and Chief Clinical Officer David Rotenberg are splitting the roles of the CEO and president on an interim basis while the organization conducts a national executive search.
BHB will be watching Caron to see how it uses its research capabilities to help guide treatment and impact the industry. Additionally, with a CEO and president search on, there’s likely to be news of a new leader very soon. It will be interesting to see who the company picks and what that means for the direction of the company’s future.
The digital canary
Also among the companies that BHB is keeping its eye on: Boulder Care.
The well-funded virtual care company will be a good test for how two headwinds in the industry may play out: the potential reinstatement of the Ryan Haight Act and Medicaid redeterminations.
Founded in 2017, Portland, Oregon-based Boulder Care provides online addiction care, including MAT. In 2022, the company raised more than $50 million in investment, bringing its total raise close to $100 million.
Earlier this year, the DEA proposed a new rule that would effectively undue controlled substance prescribing via telehealth and require patients to have an in-person examination. The proposal was met with a significant amount of pushback by industry insiders. As a result, the DEA has extended telehealth flexibility until November. But if the proposal goes through, it could mean a significant shift in how virtual MAT providers conduct business.
Boulder Care has a significant foothold in the Medicaid space and focuses on partnering with local providers. Roughly 80% of Boulder Care’s patients come from partner organizations and other organic means.
This partnership model could be clutch for the company if the DEA goes forward with its proposal because it could give it access to brick-and-mortar partners who could fulfill the in-person requirement, though it’s unclear if this is Boulder’s plan. It could also serve as a model for other virtual providers to shift their model to meet regulatory requirements.
The DEA proposal is one of many challenges that the company could face. It previously reported that more than 85% of its patients receive health benefits from Medicaid and has “dozens” of contracts with Medicaid managed care organizations (MCOs).
It works both on a fee-for-service model and population management bundles.
“It’s been really core from inception for the company to be growing with payers,” Boulder Care CEO and founder Stephanie Strong previously told BHB. “We’re really energized by the mission of helping to bring care to people who typically are excluded from other programs, whether those are digital or in person.”
However, Medicaid redeterminations could mean that up to 18 million people are at risk of losing their Medicaid coverage as the public health emergency ends, according to research from the Urban Institute. This could leave some of the provider’s clients without coverage.
BHB is watching Boulder Care to see how it handles these two major regulatory factors.
It will likewise be interesting to see if its partnership model could help the organization maintain its patient base if the DEA does reinstate the in-person requirement.
Bicycle Health is another SUD treatment provider that could be impacted by DEA’s action, and the company is already preparing for what’s coming next.
“Our plans for how we want to care for our patients and how we want to grow and expand are independent of the DEA ruling,” COO Amy Finney recently told BHB. “We are really proud of our outcomes. We know we are meeting a need and we look forward to growth and change as a leader in this space.”
That same could be said for Ophelia and Workit Health, the latter of which enacted layoffs to prepare for DEA’s moves.
A group-based approach to care
Burlington, Massachusetts-based Groups Recover Together uses a hybrid approach to group therapy. It is differentiating itself from other providers by pioneering value-based care arrangements in the SUD space.
In 2021, the opioid use disorder (OUD) provider raised $60 million, bringing its total funding raise to at least $98.2 million. The company has 100 offices across 17 states.
The service helps members get access to suboxone prescriptions, and offers members in-person and virtual group therapy.
Today, roughly 97% of Groups Recover Together’s revenue comes from value-based contracts. This value-based care approach allows Groups to provide its members with a care team and wrap-around services. It has even inked a deal with tech companies to help ensure its patients can access virtual care, even providing them with phones.
The provider also works with several state correctional departments to provide transitional care and reentry services for individuals transitioning out of incarceration. Groups help individuals leaving incarceration enroll into Medicaid or insurance.
“We’re working with the care managers and the care navigators in the facility to identify those who need services, get them screened, understand what they need, both from a substance use disorder treatment perspective, but also just from a broader, social determinants of health perspective,” Cooper Zelnick, chief revenue officer at Groups Recover Together, previously told BHB. “Then we’re working to schedule them rapid access in-take appointments so that they can walk out of the doors of prisons and into the arms of a really high-quality treatment provider, which is the difference between life and death.”
BHB is watching Groups Recover Together because of its focus on value-based care contracts and its hybrid approach to group therapy.
The industry titan’s dry powder
Any list about SUD providers in the U.S. would be incomplete without BayMark.
The Lewisville, Texas-based provider claims to be the largest opioid use disorder in North America. It has over 400 facilities across 37 U.S. states and three Canadian provinces.
In 2015, Baymark was acquired by private equity firm Webster Equity Partners. Since then, the company has been rapidly expanding. In 2022, it acquired Fritz Clinic, Kaden Health, Lucina Treatment Centers, Mahajan Therapeutics, Pathfinders Recovery Center, Emerald Isle Health and Recovery and San Antonio Recovery Center.
That momentum appears to be continuing into 2023. In June, it announced that it acquired a narcotic addiction treatment agency (NATA) and an opioid treatment program (OTP) in Sun Valley, California. Additionally, in May, it acquired two suboxone clinics in Louisiana.
The organization’s size and the private equity backing could put BayMark in a good position to be active in the M&A market when others are holding back.
“What we’re seeing when we are out talking about acquisitions is that people are dropping out quicker and they don’t want to pay up as much,” David White, CEO of BayMark Health Services, said during a panel at BHB’s INVEST conference last year. “We’re sitting there with some dry powder, and we can wait it out. That’s been really helpful from an acquisition perspective; we’re able to acquire now and we’re seeing some folks who were acquisitive, who aren’t now.”
BHB is keeping an eye on BayMark to see how it uses its dry powder in the near future. It’s additionally worth tracking whether BayMark is able to keep its title as the largest OUD provider in the country among all of the growing competition.
Don’t forget about these providers
While BHB will be watching the companies mentioned above, that doesn’t mean there aren’t other players worth following.
The SUD industry is growing as the need increases, and several innovative companies will make their marks on the space this year.
Banyan Treatment Centers is worth watching, for example, because it just named a new CEO with big plans. Pelago, formerly Quit Genius, is also a name that’s good to know because of its commitment to go 100% at risk as a business. Pinnacle Treatment Centers is positioning itself to make a splash, too.
It’s also important to watch behavioral health giant Acadia Healthcare (Nasdaq: ACHC) as it continues to grow its comprehensive treatment centers (CTCs), which provide mental health services and MAT.