In many urban centers of the country behavioral health professionals and addiction treatment programs are finding a market oversupply of services existing in their area. This market oversaturation is one that will be complicated by the continuing advances in pharmacological interventions.
One of the critical drivers in this new era marketplace has been the continuing expansion of for-profit-chains who have selectively purchased many of the larger, successful treatment centers throughout the country.
Another driver of change in the behavioral health field has been the relentless consolidation of managed care organizations, which has refocused purchasing power within a handful of companies that set and define rates, quality outcome performance measures, and professional practice standards.
CARF Accreditation has become the bottom line criteria for anyone wanting to do business with third-party payers.
The biggest reimbursement source of behavioral health services are federal and state Medicaid services, which is now the single largest payer for mental health services in the United States. And this major force, is increasingly playing a larger role in the reimbursement of substance use disorder services. Individuals with a behavioral health disorders made nearly 12 million visits to U.S. hospital emergency departments in 2007 and involved individuals with a mental disorders, substance abuse problem, or both.
While some “brand name” premier programs are simply ignoring today’s market forces and continuing the pattern of increasing rates, the reality is that over the past decade, unit prices for behavioral and social services have been dropping. With few exceptions, behavioral health service providers have not done an effective job of differentiating their quality of care, and as a result their services are viewed much like any “generic service”. During the last decade consumers have become more educated in purchasing health care and this has resulted in increased expectations of successful outcomes and lower costs for care.
For these and other reasons, it’s going to be exceedingly difficult for those behavioral health program’s that are high-cost to compete in some of these oversupplied, price-sensitive sectors of the market. Furthermore, in reacting to the consolidation of managed care operations, purchasers will increasingly demand variations from “traditional” managed health practices for their beneficiaries.
Provider organizations by now should fully understand, recognize and deal with economies of scale as a marketable competitive factors. Marginal Providers should consider further consolidating as a market survival strategy, while others might consider diversifying their product lines. In all scenarios, there will be an ongoing compelling need to conduct an opportunity cost analysis, to evaluate market opportunities and respond to market oversupply problems.
