The Definitive Playbook for Choosing Behavioral Health Markets

Hey everyone. Welcome to the Value Based Care Advisory podcast. I'm your host, Alex Yarijanian.

Today I want to talk to you about how to select a behavioral health market. Folks have been asking about how do you select a winning market when you're getting into behavioral health.

So what I've done is I've put together a playbook for you that will highlight aspects that you need to consider as you select a market to enter. So why don't we start with assuming that you've screened for associate level billing, you've screened for solid Medicaid rates.

Medicaid rates tend to be the floor in a given market and you want to make sure that those rates are at least good.

Now what you want to do is also quantify additional negotiating levers before you go ahead and commit several millions of dollars or however much you seek to commit in order to enter that market. So what are some of these additional levers? So essentially there are grouping of indicators that have.

Let's look at indicators A through D. Indicators A through D A is essentially the Medicaid market size. You want to understand what that looks like and be able to deduce a total market share or total market capture.

And the way you want to do that is go to certain databases, certain sources that I'll share with you and you'll be able to extract that information. And the extraction of that information will give you a piece of what you need to best assess whether that's a market worth getting into.

Another area is payment parity. So essentially there are mental health parity laws, of course, at the federal level.

And it's important that you investigate the extent to which you'd be protected. At the state level. You also want to look at cost of living index because that will tell you your expected spend on staffing on clinical teams.

And the lower the cost of living index, the greater your margins, which be on labor. So it's important to take a look at before you get into a given market.

Indicators E through H, look into landscape of the market and infrastructure capabilities. So what you want to do first in this category, you want to go to hrsa.

You want to be able to look at unmet needs in in a given jurisdiction or in a given zip code and be able to deduce how much demand you'll have at your clinic. Then you want to look at broadband and 5G coverage.

It's important that you implement in an area that has the infrastructure for telehealth where if a patient can't have reliable connection, then they might miss appointments, have no shows, all of which impact the business negatively. You want to look at the managed care landscape. So MCO landscape fewer.

So markets that have fewer larger plans with strict adequacy, they will, they will recruit you.

But markets that have a high consolidation of plans, markets that have any willing provider laws, these markets are a little bit more difficult to work with in terms of rates and their favorability from health plans. And in a certain extent you want to look at of course, the tax and corporate climate climate of a given, given market.

And this isn't just theoretical.

I will give you specific markets that I'm vetted based on this criteria and I think that will help solidify and make this all the more meaningful for you. So here it is. Let's say top five telehealth friendly states are Arizona.

And again, why, why do I what are the key indicators of telehealth friendliness in a given state? Mental health parity laws and the strength of these laws, including enforcement thereof.

And whether there are licensure compacts which reduce the bar of getting into a market. If you already have a clinical workforce somewhere, you can simply add, you know, via state licensure compact.

So you can simply enter another market following the appropriate procedures now as opposed to having to get licensed all from scratch if you will. So Arizona has a large Medicaid population, relatively speaking and the cost of living is not horrid. We have parity and licensure compact.

So Arizona, Nebraska, Delaware, Oregon, New Jersey are the top telehealth friendly states for behavioral health, particularly market archetypes. So what you want to do is look at best all around markets. So I'm going to tell you what those are. Arizona, Nebraska, Delaware.

Then I've also actually identified some of the worst markets in terms of volume being thin and margin being impacted. Arkansas and North Dakota being these markets, you know, they have low clinical costs while they lack payment parity.

So that's going to be a challenge. This continues. There are markets that pay high rates, so Alaska pays top rates. Cost of living index, however, up in Alaska does erode your margin.

There's no compact licensure compact covering Alaska. So that will impact your recruiting, meaning it will make it more difficult to recruit folks and of course more costly.

And then there are some growth stage bets that I'm going to put on the table which include New Mexico and Montana. I'm seeing a lot of policy tailwinds, but infrastructure is still rolling out.

We have a lot of areas that have no connection or lack of stable connection.

I hope that is helpful in terms of an overall high level view of what I consider a playbook in selecting a given market to enter, of course, in such a way that is successful and looks at factors beyond just rates and population. For instance, the number of times folks have told me that they're targeting in this particular order, California, Texas, Florida, New York.

I'll ask them why? What is the rationale? And nine out of 10 times, if not 10 out of 10, I'll get an answer or something to the effect.

Well, these are the biggest states in the country. Just because they're the biggest states in the country doesn't necessarily mean it's the best place to do business.

So the sweet spot is, is like this.

So you want to look at four aspects where associates can bill independently which will give you an expanded workforce with better margins on staff and clinical spend.

Payment parity laws that ensure fair reimbursement above and beyond the federal requirements and in addition to panels looking at demand and supply, supply and demand elements within a given market to be able to deduce or project how quickly you will ramp up to certain volume levels. And those are essentially the real telebehavioral health sweet spots.

You want to make sure that you have a good thought process going into a given market. Just to summarize here for you.

So top 10 friendly states in terms of telebehavioral health implementation according to the methodology I just shared with you are as follows. Arizona, Nebraska has really good cost of living index. Delaware, Oregon, New Mexico, and those are the top ones.

New Jersey is also a really good one, but has a high cost of living index. What I'm doing for the listening audience is showing again these market archetypes in one view. And essentially you could see that we have four types.

So we have best all around markets. These are again markets that have Medicaid scale or growth potential with parity. Payment parity guarantees volume.

And then you have the second type which is volume but thin margins.

So places where you get volume but the margins are rather thin, that includes Arkansas, North Dakota and the third archetype is high rate, high cost niche.

So essentially markets like Alaska that pay really good Medicaid rates but their cost of living erodes margins and there is no licensure compact for you to want to tap into workforce sitting somewhere else other than Alaska, again presumably an area with lower cost, a lower cost of living. And then finally we have growth stage bets. So emerging, so to speak, emerging markets that have some policy tailwinds and expansion initiatives.

Have a lot of rural shortage areas and are still ruling out infrastructure. So you want to be looking at whether it makes sense for you to get in there sooner than later. So I hope that was helpful.

I'm going to break this down for you in four action steps you can take. Step one I want you to layer indicators in a scroll scoring model. So I give you eight indicators from these eight indicators I gave you.

What you want to do is layer them in the scoring model. 2.

You want to validate demand on the ground so I want you to overlay HRSA Mental Health Health Provider Shortage area HPSA maps in addition to FCC broadband gaps Check Plan Mix so your health plan mix in a given market count the Medicaid MCOs and behavioral carve outs. Remember that concentrated markets speed contracting but raise rate cut risk. Right?

Because you only have a few plans to get a network with so speed and contracting. But because you have a few only a few plans. These plans carry substantial power and so puts your rates at risk in a way.

And run a payroll stress test finally.

So use cost of living versus your target clinician pay band and see what offsets you need to put into place and what those margins would look like for you.

Okay, the sweet spot is again, associates can bill independently, state has robust parity, rules and laws on the books and enforcement and there's unmet demand. So I hope this was helpful and let me know your thoughts. Thank you for listening and watching. I hope this was helpful.

I am Alex Yarijanian, your host at the Value Base Care Advisory Podcast.