Pediatric Behavioral Health Services Market Update – September 2024

Pediatric Behavioral Health Services Market Sees Increased Appetite for School-Based Providers

School-based behavioral health services have become a leading area of growth in Pediatric Behavioral Health M&A, offering one of the most effective settings to provide care. Effectively integrating services into the classroom has become increasingly critical as more and more students face complex behavioral, allied, and mental health challenges. Teachers, parents, and administrators are also recognizing the direct link between mental and behavioral health and academic performance. A meta-analysis from the American Psychological Association (APA) aimed at better understanding the impact of psychotherapy on youth academic performance, revealed results pointing to psychotherapy benefitting student academics, according to the APA.¹ Funding for school-based sector services are growing and well supported, backed by federally mandated programs such as the Individuals with Disabilities Education Act (IDEA) and the Bipartisan Safer Communities Act (BSCA).

Many schools are struggling to provide these much needed federally mandated services due to recruiting challenges and limited managerial and administrative expertise in delivering behavioral and mental health support, placing roadblocks for effective treatment of students in need of care. Under the Individuals with Disabilities Education Act, school districts are required to support special education students through an Individualized Education Plan (IEP) addressing their academic, social, emotional, behavioral, developmental, and physical needs. If districts cannot meet a child’s requirement, they will be placed out-of-district – elevating costs for the district. Currently, 88% of U.S. public schools reported not being able to effectively provide mental health services to students in need, citing an insufficient number of mental health professionals to manage the school’s caseload, according to the National Center for Education Statistics.² Outsourced behavioral health service providers offer greater access to highly skilled clinicians, with a deep bench of professionals, recruiting capabilities, and the ability to manage, train, and retain a specialized clinical staff. By utilizing an outsourced provider, schools also have the added benefit of allowing for increased operational flexibility and the ability to respond to changes in the number of students requiring therapy.

Outsourcing providers offers a critical solution as school districts face the daunting task of addressing the youth mental health crisis and growing demand for special education services, a challenge exacerbated by shortages of speech language pathologist and behavioral and mental health clinicians. As such, we expect that high quality school-based behavioral health providers will have excellent growth prospects and be highly sought after from both private equity and strategic buyers.

Mark SurowiakDirector, Capstone Partners

Heightened Demand for School-based and Early Intervention Services

Mental and behavioral health challenges have become more prevalent among students, and since students often lack access to other external treatment options, schools out of necessity are the primary providers of services for adolescents. According to an EAB study, 75% of children receiving mental health have received care in a school setting and are 21 times more likely to visit a school-based health clinic for mental health care than a community-based clinic.³ By integrating comprehensive mental health services into K-12 schools, the students are empowered with the necessary tools to flourish academically, emotionally, and socially.

IEPs are written plans that outline unique learning needs and goals for children eligible for special education services under IDEA. Since the 2000-2001 school year, the number of children with IEPs has risen to 7,525,941 during the 2022-2023 school year, a 19.5% increase during that period, according to the National Center for Education Statistics (NCES).⁴ Additionally, Applied Behavioral Analysis (ABA) treatment for students with Autism Spectrum Disorder (ASD) has experienced increased demand alongside a growing prevalence of ASD. Notably, one in 36 children in 2020 were estimated to have ASD, an increase from one in 68 children in 2010, according to a 2020 study by the Center for Disease Control (CDC).⁵ Post-pandemic mental health challenges have also increased demand for care, as clinical levels of anxiety and depression among children and adolescents rose 25.2% and 20.5% during the COVID-19 pandemic, respectively, compared to pre-pandemic estimates, according to a study in the Journal of the American Medical Association (JAMA).⁶

Parents have recognized the growing epidemic of pediatric mental and behavioral health issues, as well as the important role that schools play in providing solutions. Surveys have shown that 80% of parents believe that schools should play a role in the delivery of mental health treatment, according to Effective School Solutions.⁷ While 97% of U.S. public schools provide some type of mental health services to students, only about one-in-five students utilize such services, according to the 2024 School Pulse Panel survey.⁸ The most commonly identified barriers to providing effective mental health services were found to be insufficient mental health professional staff coverage to manage caseload (55%) and inadequate access to licensed mental health professionals (49%), according to the School Pulse Panel survey.

Concerns over insufficient access to school-based sector services have tracked with the growing shortage of Speech-Language Pathologists (SLPs), Board Certified Behavioral Analysts (BCBAs), and school psychologists. Demand for BCBA’s in particular has continued to outpace supply with 69,645 total BCBAs as of July 2024 and 65,366 unfilled BCBA job postings in 2023 alone, a 13.5% increase year-over-year (YOY), according to the Behavior Analyst Certification Board.⁹ Based on a 2019 study, 54% of counties in the U.S. do not have a single BCBA, with over 300 counties lacking a neighboring county with a BCBA.¹⁰ There is also a similar consistent shortage of SLPs. Employment for SLPs is expected to grow 19% from 2022 to 2032, significantly faster than the average for all occupations during the same period (3%), according to the U.S. Bureau of Labor Statistics.¹¹ Additionally, a survey conducted with current working SLPs showed that 78.5% of respondents experienced an SLP job market with more job openings than job seekers, according to the American Speech Language Hearing Association’s 2024 School Survey.¹² Growing shortages of qualified clinicians in school settings has demonstrated the need for school-districts to work with third-party providers who can bring expertise in clinician recruitment, training, and retention in order to meet the rising demand for sector services.

Federally Mandated Programs & Strong Funding Support Provide Recession Resistance

Well-funded, stable, and bipartisan supported federal programs aimed at delivering behavioral and allied health services to children and adolescents have created a recession resistant operating environment for school-based providers. Bipartisan congressional support for increasing access to school-based mental health services resulted in the Bipartisan Safer Communities Act (BSCA), which was signed into law in 2022. Throughout 2023, federal funds authorized by the BSCA were distributed to multiple grant programs across several federal agencies to bolster school-based mental health services. In 2023, the U.S. Department of Education (ED) awarded $286 million out of the more than $1 billion in BSCA grant funding, which helped to hire 14,000 new mental health professionals across U.S. public schools, according to the ED.¹³ More broadly, funding for IDEA has become a stable resource for public schools to deliver special education and behavioral services to  students. Funding appropriations for IDEA rose to $14.2 billion in 2023, an increase of 6.4% over 2022 levels, according to the ED.¹⁴

School-Based Providers Draw Strong Private Equity Interest

Due to robust and durable funding sources coupled with growing need for services, school-based providers have attracted significant acquisition interest from financial sponsors and strategic suitors. Buyers active in this sector have sought school-based providers with multi-disciplinary capabilities to address the full scope of behavioral, allied, mental health, and academic support challenges facing schools. Businesses with a proven track record of substantial growth through expanding services, and strong retention rates with school districts and early intervention agencies, have commanded premium valuations. Due to the highly fragmented market, and the prevalence of “mom and pop” providers, there is a pathway for regional platforms to gain market share and scale through market consolidation.

Capstone’s Healthcare Investment Banking Group has represented numerous businesses in the Pediatric Behavioral Health Services sector. The Healthcare Group’s highly skilled transaction execution team leverages their extensive buyer and investor relationship and in-depth sector knowledge to provide a favorable outcome on behalf of their clients. Capstone’s most recent advised transaction in the sector is highlighted below.

• Capstone Partners Advised Nyman Associates on its Sale to Point Quest (June 2024, Confidential) – Capstone Partners advised Nyman Associates—a leading regional provider of school and home-based behavioral health, mental health, and therapeutic services to children with special needs, ASD, and developmental/behavior issues—on its sale to Point Quest.

With an experienced and passionate staff of speech-language pathologists, behavioral analysts, occupational and physical therapists, paraprofessionals, and school psychologists, Nyman provides a comprehensive multi-disciplinary approach to addressing the full gamut of behavioral, allied, mental health, and academic support challenges facing schools and early intervention agencies. Dedicated to clinical excellence, Nyman invests significant resources in professional development, mentoring programs, and establishing relationships with universities with innovative programs in communication sciences, disorders, and behavioral health.

In 2022, Point Quest received a growth investment from Avesi Partners, a leading private equity investment firm focused on partnering with lower-middle market, privately held, and family-owned businesses in Healthcare and Business Services. Point Quest is a leading provider of adolescent behavioral health and special education services primarily serving K-12 school districts. Nyman Associates offers districts a differentiated, full continuum of behavioral health and special education services by providing scarce personnel, including speech language pathologists, occupational therapists, mental health therapists, paraprofessionals, and other specialists, who facilitate the proper care for each student with special education needs. Since receiving growth capital from Avesi Partners, Point Quest has completed five acquisitions and has expanded its presence from its home state in California to Arizona, Colorado, Oregon, Washington, Minnesota, Illinois, and now Pennsylvania and New Jersey.

“When it came time to select an investment bank to help us navigate the uncharted (to us) waters of M&A, the Capstone team was a definitive choice due to their deep understanding of our specific space and experience helping many similar businesses find the right partner. The convenience of having a wide variety of experts and resources made available to us and managed via a single point of contact can’t be overstated. In the world of Speech-Language Pathology, the CCC acronym stands for Certificate of Clinical Competency. Capstone’s Cs are Competence, Calm, and Confidence,” said Gary Weber, CEO of Nyman Associates, in a press release.

To discuss school-based sector services, provide an update on your business, or learn about Capstone's wide range of advisory services and Pediatric Behavioral Health Services M&A knowledge, please contact us.

Joe Collins, Analyst, was the lead Market Intelligence contributor to this article.

Endnotes

1. American Psychological Association, “Does youth psychotherapy improve academically related outcomes? A meta-analysis,” https://pubmed.ncbi.nlm.nih.gov/21133580/, accessed July 22, 2024.

2. KKF, “The Landscape of School-Based Mental Health Services,” https://www.kff.org/mental-health/issue-brief/the-landscape-of-school-based-mental-health-services/, accessed August 20, 2024.

3. EAB, “How Can Schools Support 7 Million Students in Crisis?” https://eab.com/resources/infographic/districts-k-12-mental-health-care-providers/, accessed August 20, 2024.

4. National Center for Education Statistics, “Number and percentage of children served under Individuals with Disabilities Education Act (IDEA),” https://nces.ed.gov/programs/digest/d23/tables/dt23_204.70.asp, accessed July 26, 2024.

5. Center for Disease Control, “Data & Statistics on Autism Spectrum Disorder,” https://www.cdc.gov/autism/data-research/?CDC_AAref_Val=https://www.cdc.gov/ncbddd/autism/data.html, accessed July 22, 2024.

6. Journal of the American Medical Association, “Global Prevalence of Depressive and Anxiety Symptoms in Children and Adolescents During COVID-19,” https://jamanetwork.com/journals/jamapediatrics/fullarticle/2782796, accessed April 25, 2024.

7. Effective School Solutions, “Effective School Solutions Releases New National Polling of Administrators & Parents on Mental Health Care in Schools,” https://www.effectiveschoolsolutions.com/research/, accessed July 22, 2024.

8. National Center for Education Statistics, “School Pulse Panel Survey Results,” https://nces.ed.gov/whatsnew/press_releases/5_9_2024.asp, accessed July 22, 2024.

9. Behavior Analyst Certification Board, “U.S. Employment Demand for Behavior Analysts: 2010-2023,” https://www.bacb.com/wp-content/uploads/2023/01/Lightcast2024_240305-a.pdf, accessed July 22, 2024.

10. The Transmitter, “Many U.S. counties lack autism therapists,” https://www.thetransmitter.org/spectrum/many-u-s-counties-lack-autism-therapists/, accessed August 20, 2024.

11. U.S. Bureau of Labor Statistics, “Occupational Outlook Handbook: Speech-Language Pathologists,” https://www.bls.gov/ooh/healthcare/speech-language-pathologists.htm#tab-6, accessed July 22, 2024.

12. American Speech Language Hearing Association, “2024 Schools Survey,” https://www.asha.org/siteassets/surveys/2024-schools-slp-summary.pdf, accessed July 22, 2024.

13. U.S. Department of Education, “Biden-Harris Administration Announces Nearly $100 Million in Continued Support for Mental Health and Student Wellness Through Bipartisan Safer Communities Act,” https://www.ed.gov/news/press-releases/today-biden-harris-administration-announcing-more-95-million-awards-across-35-states-increase-access-school-based-mental-health-services-and-strengthen-pipeline-mental-health-professionals-high-needs-school-districts-t, accessed April 25, 2024.

14. U.S. Department of Education, “Funding Status Appropriations,” https://www2.ed.gov/programs/osepgts/funding.html, accessed July 26, 2024.