As early as 2016, analysts predicted that competition in the behavioral healthcare marketplace would steadily escalate over several years, creating disruption that would require change for traditional I/DD providers. Now as we near the end of 2019, competition in I/DD can be broken down into three main categories: 1) mergers and acquisitions; 2) new investors; and 3) technology. Here, we take a look at each and the influence they may continue to have in 2020.
Mergers & Acquisitions
Consolidation through mergers and acquisitions (M&A) has risen steadily since 2015 (with autism services taking a larger section of deal volume each year). One significant outcome of consolidation has been a change in care delivery models. Current trends suggest providers will likely need to continue emphasizing a person-centered approach to care that incorporates high levels of coordination across services. In addition, the use of reimbursement models aligned around value-based payment methods will continue to be at the forefront in 2020.
According to SAMHSA, the number of U.S. citizens over 85 is predicted to double, from 6 million to 14.6 million, between 2018 and 2038. This anticipated growth is one of several factors driving a steady uptick in consolidations within the I/DD sector of the behavioral healthcare marketplace.
As both for-profit and non-profit providers seek to serve an expanding population of clients, some have found that consolidation yields a competitive advantage because it can elevate bargaining power and help improve efficiencies to offset higher long-term care costs.
New Investors
Competition also comes in the form of new investors eager to enter the behavioral healthcare marketplace. Private equity (PE) investors started showing interest as early as 2015, when the I/DD sector saw a 50% increase in PE deals. However, recently venture capital (VC) firms have begun to invest in private companies in the I/DD space as well. These two types of investors tend to influence the market in distinct ways. The table below helps to highlight some of their key differences.
Key Differences Between PE And VC Investment In The I/DD Sector |
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Heading into 2020, analysts predict PE firms will continue what has been a newer trend to partner with existing providers. In this partnership, PE investors help providers expand through acquisitions, improve client-centered care using new technologies, and increase the number of trained clinicians on staff to meet growing demand.
In 2020, VC investors are expected to focus more consistently on opportunities with a strong social impact, which could herald a shift toward investing in more mission-driven organizations. VC’s are also likely to continue investing in products and services that are highly innovative, including “disruptive” technology, models aimed at increasing efficiency, and offerings that streamline services.
Influence of Technology
The influence of technology on client care and sustainability of services within I/DD has risen significantly since 2015, particularly in the area of personal support technology. Agencies and providers are increasingly encouraged to use technology and technological advancements to boost capabilities and better coordinate care, including using tech to extend the workforce via in-home supports, AI-powered assistance, and companion tools.
State departments have begun to join a “Technology First” movement for individuals with I/DD, wherein state funding is provided for programs that provide individuals with I/DD access to technology and integrate technology into I/DD supports and services. State investment in this area supports both consumer-directed and home-based care, aligning with goals to increase independence for individuals with I/DD. Thus far, Alaska, Delaware, Indiana, New York, Missouri, Ohio, Pennsylvania, Tennessee, and Wisconsin are considered Technology First states.
Considerations For Providers
With greater pressure to improve quality while decreasing costs, providers will most likely benefit from maintaining a focus on sustainability in 2020. Although there is greater competition within the I/DD sector, there are also opportunities for strategic partnerships.
M&A may offer opportunities to consolidate power, expand into new areas of the country or include new service lines. PE and VC investments may provide the capital needed to improve services or close current gaps. And, as tech-oriented funding develops further, providers may be able to get support in integrating emerging tech, such as AI-powered “smart” home features and monitoring software.
Sources:
- https://thebraffgroup.com/wp-content/uploads/2017/05/BH-Mw-2017-A-Year-in-Flux.pdf
- https://www.arlingtonheritagegroup.com/blog/where-is-competition-from-new-investors-and-new-technology-coming-from/
- https://store.samhsa.gov/system/files/sma16-4982.pdf
- https://www.colemaninstitute.org/wp-content/uploads/2017/06/2017-Coleman-State-of-the-States-Tanis.pptx