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Behavioral Healthcare Market Analysis – December 2016

Fragmented behavioral healthcare market continues to consolidate among market leaders and financial buyers to expand geographically and increase service offerings

Over the past three years, valuations have remained strong in the behavioral healthcare industry. Over last twelve months, public company multiplies have been tracking at a median of 1.6x revenue and 9.9x EBITDA while transactions over the last two years are currently tracking at a median of 1.3x and 9.2x, respectively. Since late-2013 our Behavioral Healthcare Index has risen 25.6% compared to a 22.6% increase in the S&P 500.

The main drivers of growth within behavorial health include:

Expansion in insurance coverage: Passage of the Affordable Care Act provides large expansion of mental health and substance abuse insurance coverage building on the Mental Health Parity and Addiction Equity Act of 2008.

More structured reimbursement environment: Private insurers are beginning to reimburse using a value-based care model, resulting in decreased spending and better patient outcomes.

Awareness of behavioral health issues: One in five Americans have a mental health condition with only 44% of adults receiving treatment. This figure is expected to increase as treatment options become more accessible.

The segment is currently a $19 billion industry and has grown at a 4.7% CAGR over the last five years.

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