Multi-service newcomers challenge outpatient mental health market position

Outpatient mental health finds itself in a tricky position.

On the one hand, society views these providers as critical to combating the mental health crisis, and investors have poured billions of dollars into the space. On the other hand, it is increasingly being cannibalized by newcomers with strong commercial advantages.

To make matters worse, outpatient mental health providers were unable to respond. Upstarts and newcomers are integrating mental health into broader services. This in turn allows them to provide more comprehensive services, personalized experiences and expert care.

In some cases, these products are not related to healthcare, thereby hedging against challenges in the mental health industry. In other cases, health care companies have put fences around patients by consolidating services.

Consider CVS Health Corp. (NYSE: CVS ) and Walmart Inc (NYSE: WMT ), both of which are representative examples.

Each company already has millions of customers and offers a wide range of goods and services. This gives them incredible leverage in acquiring customers for new services. They are almost a part of many patients’ lives, but most healthcare providers are not. Walmart and CVS Health operate a combined 14,300 stores in the United States, according to the latest data.

Walmart Health launched in 2019 and plans to have more than 75 clinics in the United States by the end of 2024. The company currently operates 48 clinics in Arkansas, Florida, Georgia, Illinois and Texas. The polyclinic provides in-person and telehealth services. These include primary care, dental care, behavioral health, laboratory, X-ray and audiology.

CVS Health operates more than 1,000 walk-in clinics and 192 primary care clinics, including mental health services. Each also operates a retail pharmacy.

CVS Health and Walmart have a variety of services to protect them from the challenges of either.

Outpatient mental health is a challenging area of ​​practice. A single focus on one service means these providers can only meet the needs of one type of patient. Additionally, this leaves the segment exposed to headwinds.

Outpatient mental health is not a high-margin business. Paid rates lack parity with comparable physical health services. Mental health clinicians tend to have high turnover rates.

“The reality is that outpatient mental health is a miserable business,” Transformations Care Network CEO Brian Wheelan said at the Behavioral Health Business INVEST conference. “I think the opportunity is in operating with discipline, understanding what the platform means, and focusing on what it means to improve margins on the site.”

CVS Health and Walmart are committed to increasing access to universal mental health care. Others are looking to improve personalization options in one place.

Provide personalized service

Hims & Hers Health Inc. (NYSE: HIMS) is a direct-to-consumer digital health company that achieved triple-digit growth across its virtual mental health and psychiatry service lines. The company’s leadership views the mental health services business as a key growth driver.

The gender-specific virtual wellness company had 125,000 mental health subscribers as of the end of the third quarter.

Mental health business and women’s hair and dermatology business drove revenue growth of 57% year-on-year. According to public financial disclosures, third-quarter revenue increased by $226.7 million. Its net loss fell 60% to $7.6 million.

Yemi Okupe, chief financial officer of Hims & Hers, said during the company’s meeting: “Momentum in the third quarter remains very strong as we continue to successfully execute our strategy to achieve uniqueness and personalization through a world-class technology platform powered by trusted brands. solutions.” Third-quarter earnings call. “Performance of our longest-standing products such as Hims & Hers and Sexual Health remains strong, and we’re pleased to see continued performance in new products such as Mental Health, Cardiovascular Health and personalized solutions in Hers Hair and Dermatology Rapid expansion.”

Outpatient Mental Health Enhanced Professional Care

Mental health services often require a degree of specialization to meet the needs of the population. Organizations that aim to meet the needs of specific populations already have the foundation to build new mental health products.

Tia Health is a hybrid in-person and virtual women’s health company integrating primary care gynecology, wellness and, as of May 2023, mental health into one platform. The company provides psychiatry, group therapy and counseling services.

Tia Health began adding mental health services about two years ago, according to a news release.

Adding this service allows Tia Health to fill most of the gaps in women’s health. The company’s internal data shows that 91% of patients are screened for depression, compared with 49% of the general population. In comparison, 73% of Tia patients are employed in mental health care, compared with the national average of 66%.

A company focused on women’s health wouldn’t be complete without a mental health service line. According to the Centers for Disease Control and Prevention, women suffer from depression at twice the rate of men and use medications to treat depression at much higher rates than men, depending on race.

“Now, with women’s health facing a triple threat—a primary care shortage, a mental health epidemic, and a crisis of reproductive opportunity—investing in building comprehensive care for women makes more moral and economic sense than ever,” said Tia Health CEO and Co-Founder There has never been a greater urgency,” founder Caroline Witt said in announcing the new mental health service.

Outpatient mental health as a value-added business compared to stand-alone business

For the companies mentioned above, expanding mental health services allows them to integrate fragmented patient experiences into a larger whole. This larger ensemble can serve multiple or specialized needs. Outpatient mental health providers often can only meet one need.

But this is an advantage for outpatient mental health providers.

Many new entrants to the outpatient mental health field end up being unproven. This reveals the core (and perhaps the only) differentiating factor that outpatient mental health providers have: expertise and a proven track record in caring for their patients’ mental health needs. Additionally, largely rigid payers historically allergic to rapid change have entrenched these legacy models.

Still, mental health is not a great business on its own, and its advantages as a payer-supported incumbent may be showing signs or eroding.

Outpatient mental health providers face these challenges entirely. Companies that incorporate mental health into their larger product offerings are somewhat immune to these barriers because they rely solely on mental health. At the same time, they also receive the benefits and value of providing mental health services.

Payers are taking note of the access that non-traditional providers, especially retailers, can offer their members.

Sunshine State’s Ambetter, an AMA exchange health plan funded by Centene Corp. (NYSE: CNC), announced its partnership with Walmart Health last week. The deal makes Walmart Health the preferred provider in select Florida counties. It also focuses on care coordination and referral management.

The primary purpose of Ambetter’s deal with Walmart is to increase access to affordable health care. This is one of the core challenges and opportunities in outpatient mental health. Its appeal is so great that it will continue to attract more and more competitors, allowing traditional providers to continue to refine their value proposition and offer patients more and more service options.

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