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Behavioral Health Trends Prompt Health

Systems to Reimagine Care Delivery

March 2022


Strong demand, uneven operating performance, and high valuations have driven leading health systems to re-evaluate ways to meet the growing behavioral healthcare needs of their communities.

Record deal-making activity in behavioral health in 2021 surpassed 2020's strong finish.  For providers—particularly those that operate their own behavioral health inpatient unit or hospital—the number of joint venture options and the amount of private equity dollars flowing into this space may prompt organizations to consider: “Should I stay, or should I go?”

It’s no secret that the demand for behavioral health services during the pandemic rocketed to new heights. In the summer of 2020, just months after COVID-19 emerged in the United States, 31 percent of U.S. adults said they had struggled with feelings of depression or anxiety during the pandemic. Meanwhile, some individuals—especially children—struggled to access care, partly because of the lack of providers and partly because mental health services were severely disrupted by the pandemic (1).


Notes: Information is per the H2C Transaction Database, Recapitalizations and HCIT transactions are excluded from the calculation.

Key trends driving activity in the behavioral health space include the following.

No. 1: More intense interest in behavioral health services. The universe of buyers for behavioral health services has significantly expanded. Today, private equity companies are actively involved in the autism services, substance abuse, and therapeutics markets, and this activity is driving up valuations (4) throughout the behavioral health sector, with a spillover effect on inpatient behavioral services. One example is Medical Properties Trust’s $950 million investment (5) in Springstone LLC, a Louisville, Ky.-based behavioral health platform. The deal—which included the acquisition and leaseback of 18 inpatient behavioral hospital facilities, valued at $760 million(6), and a $190 million acquisition of interests in the operating company—resulted in a rich valuation, prompting many real estate and private equity firms to look at the inpatient space. This deal made a strong statement about investors’ outlook on the sector.

No. 2: Increased reimbursement for behavioral health services. With 75 percent of health plans preparing to raise reimbursement for behavioral health (7) by at least 6 percent—and with increased reimbursement and funding coming from the Centers for Medicare & Medicaid Services and federal coronavirus relief dollars (with $8 billion distributed through September 2021) (8) —the prospect of providing behavioral health care has become more appealing for some entities. This is especially true for organizations with the capital to attract top-notch clinicians and offer tech-enabled support.

No. 3: The need to reevaluate underperforming service lines has led organizations to take a different approach to behavioral health amid other priorities. Behavioral health services present a major challenge to many health systems’ bottom lines, as very few produce EBITDA comparable to the margins of dedicated behavioral health providers (9). Further, models for behavioral health are changing. Recent examples include hybrid models that incorporate a combination of in-person, virtual, and digital therapeutic care to co-location of behavioral health services providers in the emergency department, primary care offices, and certain specialty care facilities. Unless your organization is spending all of its time on behavioral health services, it is difficult to keep up with best practices in clinical care and operational efficiency.

These are just a few reasons why some organizations with inpatient and/or outpatient behavioral health services are weighing whether to continue to “go it alone” in providing behavioral health services.

Recent M&A Activity in the Behavioral Health Sector

Exhibit 2.png

Source: H2C Securities Inc. 

Partnership Options and Key Considerations

Determining the Right Path Forward

Strong demand, uneven operating performance, and high valuations have driven leading health systems to re- evaluate ways to meet the growing behavioral healthcare needs of their communities. Many are exploring alternative approaches to meet the needs of an increasingly vulnerable population, given shortages of trained behavioral health professionals, evolving models for behavioral health services delivery, the operational challenges and expense of providing care, and changing consumer needs and expectations.

If your organization is weighing its options, H2C can help. Leveraging decades of experience, we assist healthcare leaders in understanding the tailwinds driving M&A activity and partnership in this space and in determining the right solution for their organization. For more information, contact our team.

H2C M&A Tombstones | Select Behavioral Health Transactions

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has entered a joint

venture with 

Acadia Healthcare Logo.png

Financial Advisor to Bronson Healthcare

Greenville Health System Logo.png

has entered into a behavioral health joint venture

Acadia Healthcare Logo.png

Advisor to Greenville Health System (10)

Centra Rivermont Schools Logo.png
Henry Ford Logo.png

has entered a joint

venture with 

Acadia Healthcare Logo.png

Advisor to Henry Ford

has been acquired by


a portfolio company of


Advisor to Centra Health

has been acquired by

Acadia Healthcare Logo.png

Advisor to Delta Medical Center

Delta Medical Center Logo.png


  1. “Supporting Young People’s Mental Health Through the COVID-19 Crisis,” OECD, May 12, 2021, covid-19-crisis-84e143e5/.

  2. “Demand for Mental Health and Addiction Services Increasing as COVID-19 Pandemic Continues to Threaten Availability of Treatment Options,” National Council for Mental Wellbeing, Sept. 9, 2020, increasing-as-covid-19-pandemic-continues-to-threaten-availability-of-treatment-options/.

  3. Ibid.

  4. “Volume of Health-Care Deals Remains at Record Pace for 2021,” Bloomberg Law, Nov. 2, 2021, pace-for-2021.

  5. “Medical Properties Trust to Invest $950 Million in Behavioral Health Platform,” Press Release, June 15, 2021, 950-Million-in-Behavioral-Health-Platform.

  6. Tunberg, I., “Medical Properties Trust Invests $950M in Health Platform,” Globe St., June 15, 2021, platform/?slreturn=20220126101937.

  7. “Payer Survey Finds Opportunities for Renewed Focus on Mental Health,” Avalere, June 29, 2021,

  8. “Behavioral Health and COVID-19: Higher-Risk Populations and Related Federal Relief Funding,” U.S. Government Accountability Office, Dec. 10, 2021, 104437#:~:text=As%20of%20Sept.,serve%20those%20higher%2Drisk%20populations..

  9. “Q4 2020 Behavioral Health Market Report,” Sherman & Co., January 2021, Market-Report.pdf.

  10. JV terminated due to CON denial.

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