Everything You Need to Know About Buying a Behavioral Health Business in Pennsylvania

Pennsylvania holds a key status in terms of the behavioral health market of the US. It has drug overdose rates higher than the national average. Fentanyl-related overdose deaths are too common. The same goes for mental health complications. This is why greater investor attention is being observed in the behavioral health market. There is great encouragement from the government and insurance companies. You can also capitalize on this opportunity by either starting a new business or acquiring an existing one. However, buying a behavioral health business in Pennsylvania is a better option for reasons that we discuss in this blog. 

Ensure Strategique Partners is on your side when buying a behavioral health business in Pennsylvania!

Features of the Behavioral Health Market of Pennsylvania

Every market is different from the other owing to multiple reasons such as licensing, insurance policies, demand for different services, and a lot more. So, buying a behavioral health business in New York is different from buying in Pennsylvania, based on certain factors that we have listed here:

1. County-based behavioral health administration
2. 13 million residents
3. Medicaid expansion state
4. Strong demand in both urban and rural counties
5. Lower acquisition multiples than in coastal states

Steps to Buying a Behavioral Health Business in Pennsylvania

Buying a business, such as a mental health franchise for sale, is no mean feat because we are talking about great investments in a market that is still new. Buying a behavioral health business should be as systematic as possible to ensure your investment is secure. Otherwise, if you get careless about it at any stage of the process, you can risk losing golden opportunities of having prosper business tomorrow. We have tried to make the process systematic and stepwise, which includes these steps:

1. Understanding the County-Based Model for Behavioral Health Businesses in Pennsylvania

Those interested in running a behavioral health business or opening a business like a drug rehab center in Pennsylvania should understand the administrative model that is not common in other states. The businesses are administered by county authorities, which means you need to have good county relationships, local community standing, and contract status with Behavioral Health Managed Care Organizations. As a buyer, you should look for businesses that are prominent locally and have a good reputation. You can also keep in mind the following administrative authorities and check the business against their requirements:

1. County Mental Health/Intellectual Disability (MH/ID) offices
2. Community Care Behavioral Health (UPMC), PerformCare, Magellan
3. Behavioral Health Managed Care Organizations (BH-MCOs)

2. Licensing for Behavioral Health Businesses in Pennsylvania 

Licensing and regulatory aspects of things become critical in markets such as behavioral health because of stricter enforcement. You can not operate in almost any state in the US if you do not get licensed from a state body that is responsible for behavioral health businesses. Then there are strict fines and other penalties for noncompliance. Furthermore, you need to get your license renewed periodically after getting your clinic checked by the authorities. The same is true for Pennsylvania, where the following bodies are in charge:

1. Pennsylvania Department of Human Services
2. Office of Mental Health and Substance Abuse Services (OMHSAS)

If there is a single most important thing about buying a behavioral health business that you should not be taking lightly, it is the licensing and regulatory compliance side of things. You can ensure a good check of the business for licensing with the consultation of our licensing experts.

3. Understanding Corporate Practice of Medicine (CPOM) for the Pennsylvania Market

Pennsylvania, further, enforces CPOM, though not as strictly as in the case of buying a behavioral health business in California. Buyers aspiring to buy psychiatry businesses should be more concerned about CPOM, which, in actuality, translates into the following things:

1. Requires a physician’s ownership or supervision
2. Clear separation of management vs clinical authority
3. Documented MSO structures for investors
4. Regulators check who controls the practice

As a buyer, you should plan ownership structures clearly right from the beginning. However, if you do not care about it during the buying process, the issues may not emerge immediately, but they will once you get into payer audits, accreditation reviews, financing diligence, and exit transactions.

4. Workforce Landscape in Pennsylvania 

Building a good behavioral health team is crucial in any state as there is a shortage of qualified workers in the US. Pennsylvania’s market can be divided into two categories in the workforce landscape:

1. Urban centers like Philadelphia and Pittsburgh
2. Vast rural and semi-rural counties

The urban centers have higher competition and higher wages with regard to the workforce. However, the rural behavioral health markets of Pennsylvania see a severe psychiatrist shortage with fewer Medicaid-accepting clinicians, but high demand. So, as a buyer, you can then seek a business with a stable workforce, credentialed staff that accepts Medicaid, or has integrated staffing in the behavioral health market. 

5. Financial Due Diligence in Buying a Behavioral Health Business in Pennsylvania

Buying is incomplete without financial due diligence, which includes analyzing the following indicators:

1. EBITDA margins, because each service line has different margins
2. Revenue per clinician hour
3. Cost of compliance per dollar billed
4. Cost of staffing
5. CMHSP relationship strength
6. Denial reversal success
7. Authorization approval rates

These indicators give you a fair bit of idea about the financial position of a business. You can predicate your financial due diligence on an analysis of these multiple indicators.

What are the Best Buying Opportunities in Pennsylvania?

Pennsylvania buyers should try to target those businesses that are well-aligned with their goals and the ground realities of the state. We have enlisted some of them here:

1. Rural telepsychiatry expansion
2. School-based mental health services
3. Child and adolescent services
4. Justice system diversion programs
5. MAT integrated with therapy

How Can Strategique Partners Help You with Buying a Behavioral Health Business in Pennsylvania?

Strategique Partners has remained focused on the behavioral health market of the US. It specializes in this sector alone. Pennsylvania is also not new to it, which means it has helped open behavioral health businesses, licensed them, found them financing opportunities, and been eyes and brains for them. It has many successful businesses operating in Pennsylvania to its credit, which is why you can trust the experts at Strategique Partners for the following services:

1. Buy-side behavioral health M&A services
2. Behavioral health business valuation

Register yourself as a buyer with us today and find the best behavioral health businesses for sale in Pennsylvania!

Frequently Asked Questions Regarding Buying a Behavioral Health Business in Pennsylvania

The following questions are answered as commonly asked questions about buying a behavioral health business in Pennsylvania:

1. How Technology is a Competitive Divider When Buying a Behavioral Health Business in Pennsylvania?

Payers, clients, and regulators all expect data privacy and fluency from a behavioral health business in Pennsylvania. This is why technology becomes a critical aspect of a business that makes it competitive. For behavioral health businesses in Pennsylvania, there are the following tools powered by technology:

1. Behavioral-health-specific EHRs
2. Audit-ready reporting
3. Outcome tracking (PHQ-9, GAD-7, SUD metrics)
4. Integrated billing and utilization review

2. What Should Kill a Behavioral Health Business Deal in Pennsylvania from a Buyer’s Perspective?

As a buyer, one should call off those behavioral health business deals in which any of the following things are evident:

1. Misaligned CPOM structures
2. Overreliance on one MassHealth MCO
3. Misaligned CPOM structure

What Growth and Expansion Opportunities are Available for Behavioral Health Businesses in Pennsylvania?

As a buyer, you get the following opportunities in the market 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