PErspective in Behavioral Healthcare: A Market Ripe for Investments

By Steven Shill, CPA, The BDO Center for Healthcare Excellence & Innovation

A growing number of private equity investors are looking to take advantage of the booming market for behavioral health services, which the U.S. Department of Health and Human Services predicted would reach $239 billion by the end of 2014.

The Affordable Care Act has made it compulsory for new healthcare plans to cover these treatments. Young people are now covered on their parents’ plans until the age of 26. And, thanks to the economic recovery, more people can afford the out-of-pocket expenses their plans do not cover. Combined this means that demand is on the rise.

At the same time, supply is proportionally low. Budget cuts to state-run facilities have led to fewer beds and more and more patients being diverted to privately-run treatment centers.

Even so, finding acquisition targets of a suitable size can be difficult. The market for behavioral health services is extremely fragmented, which when mixed with high demand and a lack of sizeable operators makes the sector ripe for consolidation.

Over the next five years, we expect to see more and more M&A activity as investors recognize the unique confluence of investment opportunities inherent in a market dominated by small, niche behavioral healthcare entities.

Steven Shill, CPA, is Partner and National Leader of The BDO Center for Healthcare Excellence & Innovation. He can be reached at sshill@bdo.com.

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