Buying a Behavioral Health Business in Texas: What Every Investor Must Know

According to the Texas Department of State Health Services, drug poisoning deaths increased by over 75% from 2018 to 2022. A similar case is with mental health complications in Texas post-COVID. Where it is alarming, it also begs the attention of investors to invest in mental health and substance abuse treatment businesses in Texas. From a business standpoint, behavioral health businesses offer scalable, high-growth assets. Therefore, you should be reading this blog about buying a behavioral health business in Texas.

Looking to invest in the behavioral health business in Texas? Strategique Partners will guide you. 

Why is Texas a Good Choice to Buy a Behavioral Health Business?

Texas, having the 2nd highest population among the US states, offers a very lucrative market. Places like Houston, Dallas-Fort Worth, Austin, and San Antonio are hotspots of great business activity in the state. Furthermore, the drug consumption rates and mental health complications are hitting an all-time high. The existing behavioral health businesses are not able to meet the demand, and they are fragmented as well. This is why it becomes all the more urgent and lucrative for investors to buy behavioral health businesses and consolidate them.

What are the Business Categories Up for Sale in the Behavioral Health Market of Texas?

Looking for behavioral health businesses for sale should be coupled with due consideration, chief among which should be an understanding of the best types of behavioral health businesses. Texas’ market needs behavioral health businesses of the following type and category, or a mix of many of the following:

1. Outpatient mental health clinics
2. Medication-Assisted Treatment (MAT) clinics
3. Therapy group practices
4. Psychiatry practices
5. Partial Hospitalization Programs (PHP)
6. Intensive Outpatient Programs (IOP) 
7. Residential treatment centers
8. Detox facilities
9. Sober living and recovery residences

How Investors Should Check Behavioral Health Businesses Before Buying?

Every state has its own unique dynamics. Buying a behavioral health business in California is different from buying one in Texas. Buying has implications like licensing transfer, taxation, insurance credentialing, and perusal of other key indicators. Here is a guide to what factors should be examined and what indicators in these factors should guide your buying in Texas:

1. Texas Behavioral Health Licensing and Regulatory Landscape

Behavioral health business licensing is unique to every state. This is because each state has its behavioral healthcare regulatory body. Texas has the following regulatory bodies, which should be checked for licensing and regulatory requirements:

1. Texas Health and Human Services Commission (HHSC)
2. Department of State Health Services (DSHS)
3. Texas Medical Board (TMB)
4. Texas Board of Nursing
5. Texas Department of Insurance (TDI)

All these regulatory agencies are key in certification of a behavioral health business in Texas. Whether you are opening a mental health clinic or a telehealth therapy clinic offering services in Texas, you will be required to fulfill the requirements of one of them or the other. The common ones in this regard include the DSHS chemical dependency treatment facility license for substance abuse clinics in Texas and the HHSC for mental health service certifications.

2. Texas Start Program for Insurance Credentialing

Insurance credentialing in Texas for behavioral health business includes the medicaid service, which operates through STAR, STAR+PLUS, and CHIP programs. Furthermore, other commercial programs also exist. This is important for the following reasons:

1. A larger portion of payments for behavioral health services comes through indirect payments like Medicaid and other insurance coverage
2. A credentialed or paneled business is more likely to get selected by patients from the list of their insurance providers.
3. Commercial payment companies offer high profit margins for businesses

This is why you should examine the business that you are buying for its billing-related matters. Our billing services can be a great help to you. 

3. Corporate Practice of Medicine (CPOM)

Texas is unique in the sense that it enforces the corporate practice of medicine for behavioral health businesses, which means the following things:

1. Non-physicians cannot own medical practices directly
2. Psychiatry practices require physician ownership
3. Management Services Organization models are commonly used

As a buyer interested in buying a behavioral health business, you need to concern yourself with this factor because it has the potential to invalidate contracts, trigger regulatory implications, and make investment exits difficult. Therefore, you should undergo proper due diligence in this regard at the time of buying. 

4. Technical Considerations in Behavioral Health Businesses: Requirements of Texas’ Market

Technical and operational maturity is non-negotiable for behavioral health businesses in Texas. The best practices in this regard include:

• Good assistance from behavioral and mental health technology companies
• Behavioral health electronic health record system
• Telehealth platforms
• Workforce scheduling software
• Integrated RCM systems

Outdated operational mechanisms are not desirable in any business. Every healthcare market encourages the consolidation of those businesses that employ efficient mechanisms. This has a strong strategy to make a behavioral health business successful. 

5. Valuation Trends for Behavioral Health Businesses in Texas

An investor should be aware of the valuation best practices popular in a state. One without knowledge of trends can never know the right value and price of a business. The following behavioral health business valuation trends are seen in Texas:

What Can Strategique Partners Help You With in Your Buying of a Behavioral Health Business?

The behavioral health market is relatively new in its inception and boom. Texas is one of the key hotspot states where its demand has risen owing to multiple factors. However, the terrain of investing is not so smooth. You need to have an expert on your end. Strategique Partners, being engaged with the market closely, offers its services in Texas and specifically for behavioral healthcare-related investments. 

It helps you make an informed decision about the financial health and performance indicators of a business for sale. You can become sure about a business and whether it aligns with your goals or not through the following services:

1. Buy-side behavioral health business services
2. Buy-side financial valuation services in Texas

Get help in buying a behavioral health business in Texas with Strategique Partners today!

FAQs Regarding Buying a Behavioral Health Business in Texas

Here are a few of the frequently asked questions regarding the buying of behavioral health businesses in Texas:

1. What Common Pitfalls Investors Must Avoid in Buying a Behavioral Health Business in Texas?

As a strategic buyer, you should avoid these very common pitfalls at every cost as they have the potential to put your investment in jeopardy:

• Improper CPOM structuring
• Weak post-acquisition integration planning
• Overpaying for Medicaid-heavy clinics
• Underestimating credentialing delays
• Ignoring clinician turnover risk
• Overlooking lease transfer restrictions

2. How Much Capital Is Typically Required to Acquire and Operate a Behavioral Health Facility?

The acquisition cost of a behavioral health business in Texas is high. This is so because you get a running business with a steady flow of clients and a well-established staff. The exact figure may vary depending on the size, reputation, and location of the facility.

3. What Growth and Expansion Opportunities are Available for Behavioral Health Businesses in Texas?

As a buyer, you get the following opportunities in the market of Texas for your potential newly bought behavioral health business:

1. Multi-site expansion across metros
2. Correctional and judicial diversion programs
3. Telehealth coverage for rural counties
4. School-based behavioral health partnerships
5. Employer-based mental health contracts