Why Anthem + Beacon Health Options is a Gamechanger
Hi all you cool cats and kittens. Over the past month, I’ve heard of one mega deal in the mental and behavioral health space that has been overshadowed by COVID-19. It is my assertion that this lone M&A transaction will have longstanding implications on the healthcare startup ecosystem. Mental health is an aspect of health and wellness that I care deeply about. I previously served on the Board of Directors for a local mental health non-profit, NAMI Northern Virginia where I met some of the kindest humans helping individuals and families. It is there I realized that 1 in 5 U.S. adults experience mental illness each year and suicide is the 2nd leading cause of death among people aged 10-34 years old. We are suffering a mental health crisis in this country that requires continued innovation. And yet, psychiatrists and mental health providers are consistently underpaid relative to their peers, leading to further access to care issues (see below).
Now before we get to the good stuff, I’d like to quickly remind you that Healthcare Pizza LLC is more than just a blog. We are still seeking 1 lucky consulting client for 2020 who is looking to increase revenue, improve product-market fit, and develop further operational capacity. Just email us at email@example.com and we can get the ball rolling. Thanks for indulging me, now I present your personal pan pizza of knowledge.
This deal between Anthem and Beacon Health Options is big. Anthem is a dominate BlueCross BlueShield (BCBS) plan, serving all lines of business and serves 41 million Americans (or 1 in 8 Americans). To put this in perspective, Anthem reported $104 billion in 2019 revenue with $4.8 billion in net income. Unlike most BCBS plans that stick to one state, Anthem serves California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding Kansas City), Nevada, New Hampshire, New York, Ohio, Virginia (excluding the Northern Virginia) and Wisconsin. They’re one of the more dominant payers in the market. Here’s a year old slide they used for the 2019 investor day that demonstrates a diversified growth strategy.
Last blog we talked about some of the different lines of business in health insurance. Anthem operates in the Commercial (large group, small group, individual, federal employees), Medicaid, and Medicare Advantage space. If that wasn’t enough jargon for you, here’s a more detailed view of the health insurance products they sell: Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), Point- of-Service (POS) plans, traditional indemnity plans and other hybrid plans, including Consumer-Driven Health Plans (CDHPs); and hospital only and limited benefit products.
On June 6, 2019, Anthem announced their intent to acquire Beacon Health Options to “diversify into health services and deliver both integrated solutions and care delivery models that personalize care for people with complex and chronic conditions.” Beacon Health Options was formerly owned by Bain Capital Ventures (Senator Mitt Romney’s old stomping grounds) and Diamond Castle Holdings. They’re responsible for a whole host of activities related to behavioral health, including managing the mental health and substance use disorder management for 40 million people across all 50 states. They claim to serve over 260 clients, including employers, Fortune 500 companies, health plans, and state and local governments. Here’s some quick stats on Beacon Health Options pulled from their Who We Are page.
This acquisition between a traditional health plan and behavioral health management company represents a clear move towards the “holy grail” of healthcare, integrating physical health, mental health, and substance abuse, while addressing the underlying social determinants of health (SDOHs). For years health plans have talked about addressing whole person care, instead of prioritizing physical health and sub-contracting behavioral health to a third-party entity. However, for years, they have continued to outsource behavioral health to a few vendors (i.e., Beacon Health Options) for a relatively modest per member per month (PMPM). This move now represents a shift in the industry.
In reality, a company like Beacon Health Options or their main competitor, Magellan Health (who recently sold their specialty health plan business to Molina) is responsible for both really innovative and downright boring functions. The exciting stuff is providing mental health and substance use disorder solutions (MHSUD) that better coordination clinicians to focus on highest-risk members with severe mental illness. The other innovative stuff is their Beacon Care Services work deploying licensed clinical social workers and trained counselors in retail locations (i.e. Walmart Care Clinic in Carrollton, Texas).
However, it’s not all flash. Beacon Health Options must also provide necessary claims management, utilization management, prior authorization and network development functions. Now these might sound like a pile of easy and boring, but they are still important. Let’s take network management for example. That is code for maintaining a contracted and credentialed network of mental health and substance use providers. This sounds easy, but is a real pain in the a**. This includes but not limited to verifying licensure, board certification, malpractice insurance, CAQH profiles, National Provider Identifier (NPI), Tax ID, and Medicaid / Medicare ID.
This is also not just a network of a few therapists. Here’s a sample of some facilities that would be considered in-network and providing services like inpatient electroconvulsive therapy, applied behavior analysis, 23-hour observation, ER crisis evaluation, and halfway house.
- Inpatient / outpatient mental health
- Residential psychiatric
- Intensive outpatient
- Inpatient eating disorder
- Subacute inpatient
- Inpatient / outpatient substance use disorder
- Methadone medication / dispensing
- Ambulatory Detoxification
- Intensive Outpatient
The terms of the deal were not disclosed, but I expect the acquisition to have cost a pretty penny. However, similar to how CareMore has driven provider-risk contracting and Aspire Health works to manage post-acute care spend, I’d imagine the Beacon Health Options subsidiary will be successfully integrated into the general Anthem playbook. If you play in the mental health startup space, I’d carefully track this one for the next decade.