Pros & Cons of Behavioral Health Sector Investing

Bass, Berry & Sims PLC
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Investing in the behavioral health industry presents both opportunities and challenges for private equity investors.

One benefit to investors are the statutory and regulatory changes over the last 12 years — including The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Affordable Care Act — that increased the number of beneficiaries enrolled in health plans that provide mental health and substance use disorder (MH & SUD) benefits, thereby creating the potential for higher reimbursement rates. Conversely, the MH & SUD market remains highly regulated, at times with substantial barriers to entry.

Regulatory Opportunities Driving Potential Success in Behavioral Health -

Pro #1: Increased Access to Benefits -

Recent statutory and regulatory changes require health plans to offer increased access to MH & SUD benefits. For example, as of 2016, the MHPAEA requires managed care organizations, alternative benefit plans, and the Children’s Health Insurance Program to provide access to MH & SUD benefits at parity with the level at which they provide medical/surgical benefits. Similarly, the U.S. Department of Health and Human Services’ 2013 final rule regarding essential health benefits requires MH & SUD services to be covered as one of 10 essential health benefits categories in non-grandfathered individual and small group plans.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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