Private Equity’s Influence on Behavioral Health Sector: New Research Findings

New Study Reveals Private Equity’s Influence on Behavioral Health Sector

A recent study conducted by Oregon Health & Science University (OHSU), the University of Pennsylvania, and Yale University has shed light on the extent of private equity ownership in the behavioral health sector. Contrary to popular belief, the study found that private equity-owned mental health practices make up only 6.2% of all mental health facilities nationally, and 7.1% of all substance use disorder (SUD) facilities.

The researchers analyzed data from federal facility surveys and found significant variability in ownership among states. Colorado had the highest rate of private equity ownership in mental health facilities at 26.5%, while Virginia led in addiction treatment facilities at 22.1%. Despite these figures, private equity ownership in these segments of behavioral health remains relatively low in most states.

Private for-profit entities currently operate 42.5% of SUD facilities, 19% of mental health facilities, and 23% of combined SUD-MH facilities. Additionally, private equity has played a significant role in dealmaking within the behavioral health sector, with approximately 60% of all deals since 2018 involving private equity investors.

Private equity investors have expressed optimism about the opportunities for returns in addressing the service shortage and consolidating fragmented organizations within the behavioral health sector. With many American hospitals prioritizing other areas over behavioral health, private equity investment has become crucial in expanding access to services and optimizing existing organizations.

Lead author Dr. Jane Zhu emphasized the need for policymakers to pay attention to the high rates of private equity penetration in the behavioral health sector. The study did not delve into the impact of private equity ownership on costs, leaving room for further research and discussion on this topic.