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Top Ten 2022: Behavioral Health Transactions Outlook

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Based on AHLA’s annual Health Law Connections article, this special series brings together thought leaders from across the health law field to discuss the top ten issues of 2022. In the eighth episode, Jane Jerzak, Consulting Principal, PYA, speaks with Purvi Maniar, Partner, Norton Rose Fulbright US LLP, about the key behavioral health impacts related to the pandemic. They discuss how the market and government have responded to the current mental health crisis, the role of private equity in the integration of physical and mental health and market consolidation, and the landscape of post-pandemic behavioral health care. Sponsored by PYA.

Watch the conversation here.

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Speaker 1:

A H L a is pleased to present the special series, highlighting the top 10 health law issues of 2022, where we bring together thought leaders from across the health law field to discuss the major trends and developments of the year support for a H a. And this series is provided by PPY, which helps clients find value in the complex challenges related to mergers and acquisitions, clinical integrations, regulatory compliance, business value, and fair market value assessments and tax and assurance for more information, visit pya pc.com.

Speaker 2:

Hello, my name is J Zach. I am a partner or a principal with pya I'm here with PVI Manar, and PVI is a member of Norton rose Fulbright's healthcare transactions and private equity teams, and is a partner based in the firm St. Louis and New York offices. She focuses on bringing together various types of transactions involving private equity portfolio companies. PVI is passionate about improving access to and quality of behavioral health services. In the United States. She represents private equity companies and prominent nonprofit behavioral health providers in connection with their mergers acquisitions, strategic partnerships, and clinically integrated networks. She also in advises hospitals in connection with restructuring their inpatient behavioral health programs, as well as tele behavioral health providers and other clients focused in the behavioral health space. She is also the chair of A's behavioral health practice group. Welcome Povi. We've got a, uh, an interesting topic to discuss today, uh, as you wrote an article entitled behavioral health transactions outlook for 2022, a lot going on in the behavioral health space. Um, so let's get right into Harvey. Can you describe for the audience, the key behavioral health impacts related to the COVID-19 pandemic? What are we dealing with today and why?

Speaker 3:

Thank you, Jane, um, for that, uh, kind of introduction and, and yes. Um, so much, uh, going on in behavioral health, it was already such an active sector before the pandemic and, um, given the pandemic's, you know, challenge to our collective mental health and wellbeing, as well as other factors, such as issues related to racial injustice across the country that caused severe strife and disruption, natural disasters and issues in NA national politics, even, um, the level of, um, mental health issues, uh, gen has skyrocketed in the last, uh, couple of years and overall 37% of Americans are reporting anxiety and depression, which is about a 235% increase from years prior. So, um, uh, that really is, um, very worthy. Um, but breaking that down, uh, we are seeing that young people 18 through 29, um, have been seen as struggling the most with both mental health, as well as substance use issues. We have also seen pediatric mental health emergencies on the rise. So under 18, all the way, you know, down to early teens and, and below in fact, the American academy of pediatrics, the American academy of child and adolescent psychiatry and the children's, um, hospital association, um, about a couple months ago, jointly declared a national state of emergency in children's mental health, uh, issuing a call to action to policymakers. Um, and obviously, you know, a lot of this is due to, um, the isolation, um, the stay at home orders, um, lack of in person schooling and the stress, you know, of families trying to, um, maintain, um, jobs and careers while kids are schooling from home and unable to engage in all the activities they used to, um, as well as other factors. Um, and also as we all know, healthcare and other frontline workers have been disproportionately impacted due to the, um, stress of, of having to, uh, deal with wave after wave of, um, of patients, um, and, uh, overflowing emergency rooms and, um, minorities and socioeconomically disadvantaged populations have also been disproportionately, um, impacted. So it really is, um, a critical time in behavioral health. Luckily we're seeing a lot of progress, um, both from a market and regulatory standpoint, um, in this space,

Speaker 2:

Boy, what you're describing, uh, poor V is really, uh, a pandemic within a pandemic.

Speaker 3:

Absolutely.

Speaker 2:

No. You know, as you, as you describe the, the implications, the consequences, the demographic groups impacted, um, how would you say the market has responded to this mental health pandemic?

Speaker 3:

We have seen a lot of increase in market activity. Uh, it was like I said, already, a very active sector as far as, um, growth, um, for, uh, of availability, um, mergers and acquisitions and partnerships, uh, in the sector all with a view to increasing access both through in person, as well as tele behavioral health services. Um, couple notable examples, ale health, uh, which provides comprehensive mental health services through EAPs employee assistance programs, as you know, seen a big increase in the availability and emphasis on those. We raised around 200 million in its latest funding round, um, bringing its valuation to over 2 billion in order to accelerate the delivery of mental health benefits for companies with employees around the world, uh, global invest KKR announced the launch of GI health, which intends to build a new platform to offer in person and virtual outpatient, mental health across the United States life stance, uh, which is another provider of in person and telehealth mental health services across the country completed inside O in 2021. Uh, and in fact, in 2021, um, we saw more than, uh, double, uh, the number of transactions completed in all of 2020 in behavioral health, um, coming close to around 300 transac, uh, and that's in addition to a variety of other collaborations, um, and new models across the country involving competing hospital systems, uh, behavioral health providers at the community level, as well as private equity backed and national non-profit provider and government agencies coming together to collaborate, um, and form, you know, consortiums and affiliations to address a shared problem that impacts, um, both the quality and cost of care across their communities.

Speaker 2:

Wow. So there, there has been, uh, quite a bit of activity as you've described in the market space, both in terms of transactional, as well as innovation. Um, so with that as a backdrop, how has the government responded to this mental health AC uh, pandemic, uh, regulatory changes funding what's happening within our government?

Speaker 3:

Uh, great question Jane, uh, much as they did with the pandemic as a whole, the, uh, government responded as expeditiously as you, um, could, uh, expect them to, uh, in, um, putting measures in place to, uh, expand reimbursement and availability of, uh, tele behavioral health. Um, this included, um, expansion, um, of, uh, reimbursement, uh, waiver of originating site requirements. So patients could access tele behavioral health services from their homes, waivers of HIPAA requirements, which allow the use of a tele behavioral health via FaceTime. We saw, uh, state medical boards across various states, loosening risk on providers, licensed in one state, um, who are willing to deliver services to patients in different states, uh, on the reimbursement side, uh, the mental health parity and addiction equity AIA has been the law, the land for a couple of decades now and requires parity across, um, behavioral health, uh, coverage and medical surgical coverage, but, um, both interpretation and enforcement of, um, Maia, uh, has been, um, uneven and challenging, uh, for, um, many payers in many states. Um, be, uh, you know, since, since its passage and we've seen the clarifications and strengthening of parity requirements, um, in the last couple of years, including under the consolidated appropriations act of 2020, which added requirements for group health plans and issuers to prepare and submit written analyses where they have to demonstrate at a pretty granular level, um, their methodology for how they achieve parity between a reimbursement for behavioral health, um, and, um, medical and surgical care. And, uh, based on the initial findings, um, from these requirements, the initial analysis and compliance audits that were recently complete completed, um, we're already seeing plans changing their practices, including removals of exclusions for, um, medication and assistance treatment for opioid use disorders, removal of coverage, limitations for urine drug testing for mental health and substance use disorders and removal of other clinical criteria, um, limiting, um, mental health and substance use benefits. So, um, we're, you know, we've seen quite a lot of progress and, and given the bipartisan support for behavioral health, there there's quite a lot in the pipeline as well

Speaker 2:

As a follow up to that. Uh, poor V what do you think in terms of the continuation of some of these, uh, items of flexibility, the waivers and, and so forth, especially in the telemedicine space?

Speaker 3:

Um, good question. You know, I think that's a, uh, general, um, question that we are asking across, um, uh, you medicine and, and, and healthcare is, um, what's going to happen after the public health emergency, um, will there be continu, will there be continuation, should there be continuation of, um, reimbursement for telemedicine? And, you know, I think the answer is, um, is different, different settings and different specialties, but with respect to, um, behavioral health, um, where there are these large rural shortages of providers and, um, where a physical exam is typically not required. And, um, allowing patients to act as tele behavioral health from their homes, makes them feel more comfortable given sort of the stigma and the hesitation that you know is, um, decreasing, but still, um, there in relation to accessing behavioral health services, we are, um, optimistic that, um, you know, the pandemic has been an effective testing ground of, of, of sort of the increased access and effectiveness of tele behavioral health services. Um, and so, um, you know, I think key stakeholder groups are, are pushing to make the availability and reimbursement, uh, permanent, um, following the public health emergency and optimistic that will continue to see availability of reimbursement, um, as well as coverage for tele behavioral health services. I think we may see more of a challenge in terms of, um, or some lack of uniformity across state license boards in allowing practice across state lines. Um, but there, you know, are interstate medical, um, licensure compacts, and other avenues where we are seeing progress in that respect too

Speaker 2:

Well. That's great news. That is great news. So let's turn now, uh, poor V to look looking at two key themes in the behavioral health space that we're all learning more about. One is the value, uh, the benefit of integration of behavioral health with physical health. So we're seeing that as a theme, and then, uh, you've spoken regard the market consolidation and given some examples of your consolidation in the behavioral health space. So if, if we look at the themes of integration with physical health and market consolidation, what role do you see private equity playing, um, in these two themes, as we're further learning about how to be more effective with behavioral healthcare,

Speaker 3:

Such an interesting and rich question, Jane, uh, you know, both integration as well as consolidation in my view are, are so important, um, to advancing this field integration of behavioral health with physical health enhances the understanding of the whole person, um, and allows them to be treated much more effectively than if we were, you know, treating the physical conditions in isolation, from Coke, her in mental health or substance use disorders. Uh, and there have been, um, numerous, uh, well established studies, um, by renowned institutions that have shown that treating behavioral health alongside with physical, um, both in emergency room settings, as well as, um, inpatient and outpatient settings can, um, achieve, um, remarkable improvements in quality of care that's delivered, uh, reduce inpatient stays, um, increased patient status faction and, uh, and, um, a significant significant amount of cost savings. So I think integration is, is critical to the, um, advancement of both behavioral and physical health, um, however to get there, um, because the behavioral health provide market is, um, is still very, very fragmented. Um, we need, um, a lot of investment in infrastructure in, um, best practices in uniform compliance plans, um, in professional management, um, in, you know, uh, behavioral health, um, electronic medical records. And I believe that, um, the more established PLA players, um, you know, both, um, publicly held companies, um, such as universal and EDIA as well as, um, private equity backed companies as, as large national nonprofits like Hazel and Betty board can all play a key role in bringing together, uh, the, um, smaller practices, the, um, individually owned facilities and, um, make that invest, um, that is required to, uh, provide uniformity, achieve compliance with, you know, privacy and third party reimbursement regulations, um, in order to, uh, partner with hospitals and health systems and, um, traditional providers of healthcare, um, and help them integrate, um, the behavioral health services into, um, the physical care that they're providing.

Speaker 2:

So poor. Do you think private equity and this related market consolidation will help us as a country get to this needed integration faster?

Speaker 3:

I think that is one of the forces that, um, uh, that will be very helpful. Yes. You know, I think another way the at hospitals and health systems could, could do it as by directly investing in, um, providers in behavioral health providers in their community and bringing them in house. So I think we will likely see a lot of both happening, um, including, you know, um, even, uh, increasingly training primary care physicians to do behavioral health screenings and integrating behavioral health providers into primary settings, so that, um, there is an integrated experience, um, that could be hopefully be delivered to patients on an as needed basis.

Speaker 2:

And what about the restriction on a integrated health records with behavioral health records? I believe there's additional, uh, limitations on the sharing of records, uh, is that restriction, uh, going to be a barrier for having us integrate physical and behavioral health?

Speaker 3:

Uh, another great question, Jane, uh, as you, um, the, uh, uh, some regulations governing the confidentiality of substance use disorder, patient records, um, sometimes known as for C at bar part two, uh, have, uh, much more stringent requirements than HIPAA, um, for the use in and disclosure of behavioral health, um, uh, and substance use, uh, disorder records, uh, where there is federal funding. So, you know, if, if, if an organization receives Medicare or is even tax exempt, um, and provides substance use services, they, um, are governed by, uh, 42 CFR part two. And, um, uh, we have seen some loosening over the last several years, um, of, um, the, uh, the part two requirements, uh, recognizing the new, more integrated, you know, value based, um, care delivery model, as well as the need to integrate behavioral and physical health. Um, we're, we're now at a stage where, um, be behavioral health records, substance use disorder records can be shared, um, via a general patient consent for treatment payment and operations. And I'm optimistic that, um, will continue to see progress in that respect, cuz it, it is important. Um, but you know, there will also need to be a balance and a recognition that, um, unfortunately there is stigma around behavioral health. People worry about, um, how, uh, how, you know, the sharing of those records may impact their employment or, um, have law enforcement concerns. And so as long as there's, you know, their stigma and those types of privacy concerns, they'll, they'll need to be dis balancing act. Um, but we are absolutely seeing progress in that respect as well.

Speaker 2:

Well, that's, that's good news because we do need to get there for successfully caring, uh, for these populations. So that's, that's great news. Um, let's move forward. Um, we're moving past a bit, the pandemic we're, we're moving into more of an pandemic or kind of a sustain. So if we think about where we are with the pandemic, what would you see the post pandemic behavioral health or tele behavioral health world look like and why?

Speaker 3:

Uh, yeah, I think, um, you know, pull up my crystal ball now and, um, start to make, uh, predictions, but I'm, I'm optimistic that will continue to see a lot of integration and a lot of consolidation. Um, but I think one impact of the consolidation, um, and the increased governmental and a commercial reimbursement, um, that will be accessed through the consolidation will be, um, increased scrutiny and increased focus on compliance. Understandably, you know, whereas you had smaller behavioral health facilities and providers, many of which were, um, dependent on self pay, uh, for the most part often flew below the radar, but large private equity back players and other, um, deep pocketed consolidators that receive significant governmental and commercial reimbursement will become attractive targets for federal enforcement of false claims act. In fact, um, since 2013. So, you know, well before the pandemic, at least 25 private equity backed healthcare companies, um, paid settlements in excess of 570 million for alleged violations of the FCA, um, and behavioral health companies may be at greater risk for enforcement compared to other healthcare services companies because, um, there's been a history of, um, uh, inappropriate practices in this sector. Um, and there, um, is now the availability of special legislative tools, um, specific to behavioral health, such as ECRA the eliminating kickbacks and recovery act of 2018 that, that the government can use and, and has started to use to ensure, um, uh, that, um, the, um, there's, you know, um, practices with respect to referrals and you are in compliance with applicable regulations, um, on the bright side, you know, the, the larger players in behavioral health have both the resources and the right incentives, uh, to invest in pre-acquisition diligence to, um, you know, see where there may have been historic problems, group those out and, um, to invest in sound compliance programs and practices post acquisition. And so, um, I, I'm optimistic that there's really this great opportunity to raise the bar for quality of across the behavioral health industry as a whole. Uh, so that's on the compliance, uh, side, um, on the, um, the parody side, I think will continue to see progress in, um, enforcing these, um, these, uh, the parody requirements, um, that were passed, uh, recently, um, the department of labor, uh, health and human services and, and treasury, um, have asked Congress to, um, strengthen enforcement authority in several ways, for example, like providing authority to assess, um, uh, penalties for parity violations, uh, or expanding authority to recover amounts, lost wrongly denied claims and, um, expanding permanent access to telehealth and remote care services, um, on the tele behavioral front, as we previously discussed, um, you know, we've, hopefully the pandemic, um, has been, um, a useful testing ground for the effectiveness of tele behavioral, um, services. And so we'll continue to see those expand. Um, and, uh, in light of the growing pediatric mental health crises, there have been several bills that have been introduced to Congress that are intended to improve students access to mental health services and provide funding for suicide awareness and prevention. Um, so I think the outlook for, you know, additional, um, consolidation integration and legislative changes is, is bright, um, particularly on the legislative side, given the broad bipartisan support for behavioral health.

Speaker 2:

That's excellent. Um, and just a follow up question. Do you, you believe that the increase in reimbursement rates and kind of the organization that we're building around behavioral health will increase the supply of psychiatrists and other behavioral health providers?

Speaker 3:

I think that that is a, um, a necessity Jane because there is such an undersupply and that was before the pandemic. We had 40% counties across the United States that didn't even have a licensed social worker largely in rural areas. Um, I do think that increased reimbursement, increased awareness, increased demand, and the increased value we place on, um, our mental and behavioral wellbeing, um, will help hopefully motivate and incentivize, um, more, um, medical students and other, um, professionals to go into behavioral health. But I think that is something that will take time, obviously. Um, but I think that, yes, we'll see progress in the right direction.

Speaker 2:

Excellent. Well, poor V this has just been a very enlightening, uh, discussion regarding the issues and opportunity with behavioral healthcare, as we see it today, any final concluding comments for the audience?

Speaker 3:

Um, I think we've covered a lot of ground, you know, I think, um, much like the overall acceleration and telemedicine trends that resulted from the pandemic that progress we've seen in behavioral health, including increased access to tele behavioral health and early attention to pediatric mental health, um, really represents some of the silver linings of this tumultuous period for healthcare in the United States. And, um, I'm optimistic that, um, all of the recent market and regulatory advances in behavioral health, uh, represent significant overall progress towards closing the gap, um, in an area of healthcare that has been historically misunderstood and, and neglected. So going back to the silver linings, I think, you know, these are some of the silver linings of, um, the last, uh, couple of very challenging years that we have had.

Speaker 2:

Thank you. Thank you for your insights again, poor V Manar. Uh, thank you audience for listening to this podcast. Again, my name is Jane or Zach. Um, thank you.

Speaker 3:

Thank you, Jane.

Speaker 1:

Thank you for listening. If you enjoy this episode, be sure to subscribe to a H a speaking of health law, wherever you get your podcasts to learn more about ALA and the educational resources available to the health law community, visit American health.org.