Mental Health & Substance Abuse

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 11,100 mental health and substance abuse centers in the US provide treatment and care for patients with mental health disorders and substance abuse illnesses, also known as behavioral disorders. About 48% of outpatient service centers and 62% of residential treatment centers are non-profit organizations.

Dependence on Third Party Payers

Mental health and substance abuse centers rely primarily on insurance companies, managed care organizations, and government programs as their main sources of revenue.

Coverage Improving Via Parity Laws

Growing recognition of the cost of mental illness and lack of patient access to care has resulted in federal legislation to improve mental health and substance abuse coverage.

Industry size & Structure

A typical mental health or substance abuse center employs 37-55 workers and generates $3-4 million in annual revenue.

    • The mental health and substance abuse service industry consists of about 11,100 companies that operate 20,000 facilities, employ about 495,400 workers, and generate $43 billion annually.
    • About 48% of outpatient service centers and 62% of residential treatment centers are non-profit organizations.
    • Large organizations include CRC Health Group and the Hazelden Betty Ford Foundation.
                                  Industry Forecast
                                  Mental Health & Substance Abuse Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Nov 4, 2022 - Demand Strains Capacity
                                  • Six in 10 psychologists say they don’t have openings for new patients, according to a survey conducted by the American Psychological Association. Nearly half (46%) said they have been unable to meet the demand for treatment and nearly three-quarters (72%) have longer waitlists than before the pandemic. On average, psychologists reported being contacted by more than 15 potential new patients seeking care a month. Demand for anxiety and depression treatment remained high for the third consecutive year while demand for treatment for trauma- and stressor-related disorders and substance use disorders has grown.
                                  • The US Department of Health & Human Services (HHS) has renewed the Public Health Emergency (PHE) declaration for COVID 19 for another 90 days, beginning on October 13 (the date the PHE was previously scheduled to expire) and extending through January 11, 2023. The emergency measure linked to the PHE that may be of most interest to mental health and substance abuse services is coverage of telehealth services. Medicare and Medicaid coverage of telehealth services was extended immediately. PHE renewals keep in place flexibilities under Section 1135 waivers, such as the expanded use of telehealth. They also extend public aid programs. HHS will provide states with 60 days notice prior to the termination of the PHE. Prior PHE renewals gave HHS the discretion to terminate the PHE at any time. Waiver of cost-sharing for medical and behavioral telehealth services by health insurers is likely to be extended again by insurers.
                                  • The 988 Suicide and Crisis Lifeline is being used by more Americans in distress than the old 10-digit suicide prevention line it replaced, according to the US Department of Health and Human Services (HHS). The Lifeline saw a 45% year-over-year increase in overall volume of calls, texts, and chats during the first full month of operation. The number of calls answered went up from 141,400 to 216,000 – a more than 50% increase, according to HHS officials. Texts answered increased 1,000% – from 3,400 in August 2021 to 39,900 in August of this year. The number of chats on the Lifeline's website that were answered increased 195%.
                                  • The Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates for the Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) for fiscal year (FY) 2023. Total estimated payments to IPFs are estimated to increase by 2.5% or $90 million in FY 2023 relative to IPF payments in FY 2022. CMS updated the IPF PPS payment rates by 3.8%, based on the final IPF market basket update of 4.1% less a 0.3 percentage point productivity adjustment. A permanent 5% cap policy was included to smooth the impact of year-to-year changes in IPF payments related to decreases in the IPF wage index.
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