Digital health companies are flush with capital, thanks to historic levels of investment across the last year. Among them, new behavioral health entrants are generating the most attention (see recent funding rounds closed by Lyra, BetterUp, and Ginger, as well as the planned $1.4B IPO of Talkspace). Their success has a lot of observers very excited, for good reason. Behavioral health care desperately needs to find scale to catch up with growing demand for such services. But I’m not certain the outlook is entirely positive. I’m concerned that—without active measures—the growth of virtual behavioral health could threaten the supply of traditional providers and disadvantage patients with complex needs.
Let me first acknowledge the real benefits that investor-backed start-ups are unlocking. In simple terms, new direct-to-consumer and business-to-business behavioral health products can reduce major barriers for patients to get the care they need. That’s happening on a few fronts. First, the virtual delivery model is improving access for those who live too far from care resources or don’t have time to pursue care. Virtual care may also reduce the stigma of behavioral health problems by offering patients a more discreet path to a therapist’s front door. And new entrants are lowering the price point for behavioral health patients. Consumer-oriented services like Talkspace advertise per-session rates that are generally lower than their in-person equivalent, and patients gain economies of scale when they buy into a monthly, quarterly, or semi-annual packages. Other start-ups, like Lyra, are selling their products to employers, who then offer access to employees as a benefit (at least up to a predetermined service ceiling). Viewed in isolation, this is all very good.
But isolation is not what we have. These companies now exist alongside traditional health systems, primary care providers, and behavioral health specialists. And the more the newcomers succeed, the greater the disruptive impact they’ll have on behavioral health care overall. That’s not necessarily a bad thing. However, the traditional elements of behavioral health supply are already so fragile, under-resourced, and critical, that further destabilization (without active mitigation efforts) could be damaging for the patients they serve.
My first worry is the further reduction of the behavioral health workforce. New entrants can use the promise of scale and lower costs to successfully acquire millions of new behavioral health patients. Most of those patients have low-acuity needs and some ability to pay for care out of pocket (or an employer with the resources and instincts to offer such services as a benefit). These are the patients that traditionally make money for behavioral health providers, particularly the specialists—including psychiatrists, psychologists, therapists, and counselors—who have turned to the self-pay market as the best opportunity for sustaining their practices. What happens to those specialists if they see their patients migrate toward these new companies—the ones with lower rates, easier access, more communication options, and the consumer-oriented marketing to wrap it all together? The economics of the self-pay practice model—the most attractive model for specialists in a world where true parity for mental health reimbursement doesn’t exist and claims denials are disproportionately high—start to deteriorate.
This might not hurt the workforce if the digital behavioral health companies offered a strong employment alternative, but that isn’t always the case. A specialist who joins an online therapy company very often takes a pay cut, and likely sees more patients than they had previously. With a poor financial outlook already partly to blame for the lack of interest in behavioral health professions—at least in comparison with other medical specialties—we could see even fewer behavioral health specialists join the field over the long term.
My second worry is increased fragmentation of care for those who can least afford it. New entrants rely on consumer-facing marketing and employer steerage to connect new patients with behavioral health services. Through a combination of incidental and intentional design choices, those patients are often walled off from the rest of the care continuum. Without navigational support and referrals to in-person care and other specialists, patients with high-acuity needs and chronic comorbidities can remain disconnected from the wrap-around support they need. In addition, a larger, less healthy, less wealthy cohort of patients may never gain access to the benefits offered by new digital entrants because the traditional care settings and public payers they rely upon aren’t pointing them in that direction. They’re limited to whatever supply of behavioral health care is available to them in emergency departments, primary care clinics, FQHCs, and elsewhere. To make matters worse, those traditional providers may increasingly abdicate responsibility for new investments in behavioral health as start-ups capture whatever financial upside is available in the market.
So, can we have the good without the bad? Can we have virtual behavioral health care’s benefits of scaled access at a lower cost without damaging clinician supply or increasing fragmentation of care? It’s possible, but not without taking proactive measures. Here’s what would need to happen.
1. Traditional providers should prepare for disruption and adapt accordingly. Interest in digital behavioral health won’t ebb anytime soon. So there is a real need for traditional providers to evolve their strategies, in part to remain financially competitive and in part to embrace the features that will improve the service they provide to patients. While the high overhead and administrative costs of managing a private practice may make it difficult for some specialists to reduce their pricing for self-pay patients, these providers certainly have room to enhance patient access and experience. By improving throughput and embracing digital modalities, traditional providers will strengthen their position relative to disruptive forces. They may also create the conditions to accept more payer types—including Medicaid and Medicare—without further eroding their financial position.
2. New entrants need to invest in behavioral health professions. New market entrants must understand that even scaled digital services require a sustainable supply of providers over the long haul and therefore pursue business models that build up and sustain behavioral health professions. These new entrants understand—and take advantage of—the fact that direct-to-consumer and B2B products enable their companies to employ a broad range of professionals. While traditional provider organizations continue to rely heavily on psychiatrists and social workers, whose services are more often billable to health plans, new entrants can use licensed counselors to manage a wide range of low- to moderate-acuity needs. But expanding the field of providers won’t succeed without strong incentives to join it. New entrants must structure direct employment and contracts that offer strong financial and quality-of-life incentives for providers to join up, whether they’re new to the workforce or coming over from a traditional practice.
3. Traditional health care providers and health plans must collaborate with new entrants to integrate their services into the broader care continuum. Without incentives for start-ups to independently tackle the more challenging aspects of behavioral health through new products and services, they must develop stronger ties to the broader care ecosystem. Health plans need to engage with digital behavioral health companies to serve their members as well as their networks of PCPs who today shoulder a disproportionate burden of the responsibility for meeting behavioral health needs. For PCPs, the release valve provided by digital health vendors cannot be undervalued. As for the new entrants, they must be willing to form such partnerships and require their providers to actively refer patients to in-person behavioral health or other specialty care when it is required.
But true integration requires more than referring patients from their PCP to a digital behavioral health provider and back again. True integration requires a cross-industry effort to incorporate universal mental health screenings across the care continuum—a level of proactivity that is largely missing today. It requires a cross-industry effort to define, codify, and pursue consistent measures of quality in behavioral health care. And it requires a cross-industry effort to design care pathways for patients that seamlessly weave together new and traditional care models, taking advantage of the benefits and adapting to the constraints of both.
I want to be clear about one last thing as I conclude. I do not believe new entrants to the behavioral health space are acting in bad faith, nor do I believe the problems they seek to solve are imagined or unimportant. Rather, my concerns are rooted in my belief that the opposite is true. The promise of positive and sustainable change in behavioral health care supply is not one that can be taken for granted. Done right, emergent actors could meaningfully add to the supply, quality, and accessibility of behavioral health services. I simply hope that they agree, and that they build accordingly.
Clare Wirth and Darby Sullivan contributed to this post.
The effects of continued and prolonged restrictions on daily life has impacted the mental health of the world’s citizens in profound ways. But the health care system is ill-prepared to deal with the massive challenges that a year of isolation, fear, and anger are certain to have produced, especially among children. This week on Stay Up to Date, we'll discuss the outlook not only for demand for behavioral health, but who is poised to succeed in treating it.
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