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Venture funding is at a record high - and yet, major gaps persist
Billions of venture dollars are flooding into behavioral health. And yet, it’s far from enough. There are still major gaps to overcome and opportunities that have not been addressed.
For this behavioral health issue of Second Opinion, I teamed up with Dr. Ben Robbins at GV, an investor and psychiatrist. As a clinical expert who’s funded a variety of companies in the space (Headway, Brightline, Quartet and more), Ben is super knowledgable on the state of play in behavioral health today. We also talked to a range of experts including founders, clinical psychologists and patients to get a richer array of perspectives.
Here’s a summary of what we learned and some theses we’ve developed. And as always, we welcome your perspectives and thoughts.
So let’s first talk about the need. Here are some high-level stats that may blow your mind if you’re not following the space:
Approximately 1 in 5 American adults have a mental health diagnosis
Only about 50% of people with a mental health diagnosis receive treatment
50% of all lifetime mental illness begins by age 14
About 1 in 10 U.S. adults with a mental illness have no insurance coverage
Clearly, and despite the prevalence of super well-funded companies in this space, there’s a huge problem that needs to be solved. We’ll get into the gaps later, but let’s start with some of the most gaping problems that you can’t ignore if you’re working in or thinking about behavioral health.
The provider shortages
Simply put, there aren’t enough providers to meet the need. By 2025, Human Resources and Services (HRSA) projects shortages of all but 2 of 9 mental health provider types, and those shortages are projected to be greater than 10,000 workers.
For startups, that’s often resulted in competing for the same pool of talent through incentives, typically in the form of higher salaries for providers. Oftentimes, that’s paid for with venture dollars, meaning that it’s not sustainable in the long-term.
One obvious solution is to promote mental health careers and train more providers. Some companies have gone as far as to do this training themselves. Concert Health, for instance, told us that it’s providing an internship program for nurse practitioners & behavioral health providers, as well as Continuing Medical Education (CME) training to its employees and partners. But all of that takes time.
So here are some things that we are seeing happen in the interim:
Paying for licenses: There are plenty of therapists out there, Steven Ramsland, a clinical psychologist and advisor to behavioral health companies, shared. But there aren’t many who take insurance; work outside of cities; or want to work in community health centers. Just shy of 40% of Americans are living in areas experiencing mental health shortages; and about two-thirds of those shortages are in rural areas. The states with some of the lowest access to care? Wyoming and Utah. Meanwhile, patients in New Jersey and Massachusetts are faring far better. In Ramsland’s view, the phenomenon could be temporary. Behavioral health startups may eventually require fewer providers per member than traditional practices if the technology can generate efficiencies. What will likely happen in the short-term is that more and more startups will employ “geographically dispersed providers” via telemedicine, notes Ramsland, and then pay to help them obtain multiple state licenses. There would be a core clinical team of mental health professionals that are employed, with some additional support from providers on a contract basis.
Cleaning up directories: Many patients look for therapists on sites like Psychology Today. Providers use these online directories when they have an opening and they’re looking to add more patients to their panel. They’ll share that they’re accepting new patients and will provide contact info. But once they’ve found new patients, they sometimes neglect to take the post down. That leads to many patients needing to call 10 or more providers to find one who’s available. Many will give up in the process. Several startups are solving this problem including Sondermind, Brightside and Headway by making it much easier to connect with a mental health professional who truly does have availability and accepts insurance. Experts have told us that another problem here is that some therapists will describe themselves as experts in every area to expand their potential pool of patients, which makes matching more difficult.
Better matching: That brings us to our next point: We need to do a better job of connecting patients and providers. Most patients don’t know the difference between a coach, a therapist, a psychologist, a nurse practitioner or psychiatrist, said Dr. Monika Roots, a psychiatrist with experience working in digital health, and they’re confused about who to turn to first. Startups are still working through these challenges. For instance, a coach in theory is less expensive and more readily available than a psychiatrist. But if a patient is suffering from a more severe or complex illness, a coach may not have the resources or training to effectively manage the situation. Dr. Roots believes that in those circumstances, it would be most beneficial to connect the patient to a care team that includes a psychiatrist to support them with a treatment plan, but leverage a coach between sessions. It’s easier said than done, but far from impossible. On the employer front, navigation players like Accolade, League and Grand Rounds are working on this very problem.
Let’s take that point a step further… Ben recalls having an awakening during residency. He described feeling poorly matched to nearly all of his patients. For many of them, his training was overkill and for others he didn’t have sufficient training or resources. Like most resident physicians he saw a roster of patients every three months who had been stably on one or two medications for years. He might on occasion tweak one of these patient’s medications by a negligible amount. But otherwise, not much would change. In his view, he could have been replaced by a coach who would do these check-ins intermittently - and refer the patient to him if the patient’s condition worsened. Conversely, he did not have the training or resources for a set of particularly complex patients. An example might be a non-native English speaker recovering from a first psychotic episode and reluctant to take medications that made them too tired or caused weight gain. For these patients, he would have loved to have a team-based approach including a peer or case manager who could check in with the patient, in their language, between visits or even go to their home to check on their well being and count their pills to determine if they were taking the medications at all. Yet no matter the complexity of the patient, the only tool available was one on one visits for 20 minutes.
Put the providers under one roof. Imagine all the referrals and patient care could be done in one multispecialty practice - and providers work with teams rather than individuals. This means the level of care can be escalated and de-escalated based on the needs of the patient. For example, a patient might do an intake with a psychiatrist who determines that weekly medication and therapy visits are necessary to get through a difficult period of depression. As the depression improves, medication visits could be spaced to every three or six months, and therapy could be de-escalated to coaching and then to a peer or group. A social worker would be available for counseling and assisting with connections into community services like job or housing support. Companies starting to do that include Lifestance or Aptihealth. Startups tend to be much more focused on the escalation versus the de-escalation, but both are important.
Supporting primary care: Mental health needs to be better integrated with primary care, which remains the front door of health care. In countries like the Netherlands and Sweden, more than 90% of primary care practices have mental health providers on staff. In the U.S., only a third have mental health providers on their care teams. Less than half of primary care docs in the U.S. reported in a Commonwealth Fund survey that they felt equipped to handle the mental health needs of their patients. We need to better equip our existing providers to talk to patients about their emotional health. Quartet Health is focused on helping primary care physicians easily refer to mental health providers. Likewise, Concert Health has a “collaborative care” model in place, which involves making behavioral health part of the patients’ primary care team.
Big picture, we need true mental health parity: For many of the therapists we’ve talked to, taking insurance is a self-described form of charity. They get paid so little relative to their cash prices that it’s untenable, particularly for those living in expensive urban areas like New York, Boston and San Francisco. Mental health is health and we need to pay for it as such. It’s been more than ten years since the Mental Health Parity and Addiction Equity Act was signed into law, but there are still some well-documented challenges. Much of that is around the lack of oversight and enforcement via the states. We need to fix it in order to get more therapists taking insured patients.
The quality problem
There are two distinct buckets in digital behavioral health that have emerged. Companies either operate as:
Marketplaces: Therapists can join the platform when they have some space in their panel to reach prospective patients; there may also be a contract in place with a third-party provider group
Clinics: Some companies employ or contract with mental health professionals. Most of these startups are either focused on relatively low acuity depression or anxiety, or focus on specific conditions like OCD, substance use disorders, or eating disorders
The first approach is certainly more conducive to scaling and it’s one we’ve seen a lot in the existing ecosystem. But there are limitations. As Ramsland points out, Managed Care Organizations are increasingly asking startups about whether their providers are employees, 1099 contractors or a combination: “The reason they’re asking that question is they say they’ve experienced service delivery problems with behavioral health companies that primarily utilize independent contractors who jump between multiple digital practice platforms.” According to Ramsland, these organizations don’t see the same quality of treatment that they get from startups that primarily use employed providers in a “tightly designed’ clinical treatment platform. Where he sees the role for contractors is to supplement the work of the core clinical team, as long as they’re well trained and monitored.
After speaking with patients who’ve tried out a number of different virtual behavioral health companies, we’ve seen a huge variety in the quality of care. Frankly, getting this wrong isn’t an option in the long-run. It can pose harm to patients when providers are not high-quality and aren’t a good match. And in some circumstances, there’s a growing concern that companies in the space are pushing meds too quickly (“digital pill mills”) or hiring extremely junior or inexperienced providers. Having a tight network means that both training and curation is easier. It’s also a benefit for companies that are treating patients that require specific forms of treatment.
For instance, a startup called NOCD, which provides Exposure and Response Prevention (ERP) therapy to patients with Obsessive Compulsive Disorder (OCD). ERP, which aims to free people from the cycle of obsessions and compulsions, is known to be highly effective but very few therapists can do it well (this is a fantastic article on the topic). Because of the dearth of psychologists and other mental health professionals with experience in ERP, some studies indicate that it takes around 17 years for OCD sufferers to get proper treatment. NOCD, by recruiting mental health professionals and then teaching/supervising them, can simultaneously treat patients and increase the supply of providers.
Along these lines, one thing we’d like to see change is this very simple notion that coaches have nothing to offer and that all patients need access to a psychologist or psychiatrist. Coaches are often trained therapists or social workers, and they can often be leveraged effectively. There’s also a role for meditation apps like Headspace and Calm. Sometimes a patient can truly be helped outside of a consultation with an MD, and this care is by no means inferior when administered to the right patient at the right time.
What’s getting funded
If you’ve been paying attention to the sector, you’ll know that a whole lot has been invested in digital health in the past five years. That said, it’s a little tricky to determine exactly how much because it depends on your definition of behavioral health. For instance, Rock Health will include “generalist” players like Doctor on Demand and MDLive into the mix because these companies offer online therapy as part of their primary care package. The pure specialists like Ginger, Lyra, Modern Health, Cerebral, Headway and others are still a very large category on their own. But it’s a lot less than you might think. Per Rock Health’s analysis, generalist startups accounted for $1.6B of funding in 2020 compared to the specialists’ $804.3M. CBInsights has come up with a similar metric: $1.5 billion for 2020, so we assume most researchers are including the generalist players in their calculation.
Whether or not that calculus makes sense to you very much depends on how you perceive behavioral health. If you think mental health should be part of a broader health care experience or treated separately. Our personal opinion is that we need to invest in both. Some patients will want to seek care from behavioral health specialists. Others can best be reached via other access points. For instance, including a therapist in a roster of providers that treat a postpartum mom at risk for depression.
In terms of online versus offline and the hybrid option, we’re seeing funding across all three areas. In our opinion, it’s still early days for virtual-only. What we’re seeing so far:
Some patients would benefit from a mix of in person and online (this may be the largest cluster)
Some patients want online only
Some patients only want to be seen in person
In Ben’s opinion as a psychiatrist, most patients would ideally establish a relationship in person and then shift primarily to virtual with the occasional followup in-person. These patients may struggle to establish a relationship online, but they can maintain one that way that’s already been forged in person. The virtual option may be best suited to people who are incredibly busy and don’t have time to make it to an in-person appointment, or don’t live nearby a provider office. Those that need to be seen in-person may also disproportionately have more severe mental illness, or may be in the midst of a crisis. But others may prefer to go into a clinic or office simply because it represents a safe space that’s separate from their home environment or because they find it easier to form connections in person.
“I love the convenience (of online) and now prefer virtual but I belong to a patient group clinicians call ‘high functioning and highly motivated,’ Elsie Ramsey, a depression patient/mental health advocate who also happens to be Chrissy’s cousin, shared with us. “I hear about challenges from lots of other patients, like the difficulty of bonding with a new therapist through a screen or trouble finding private spaces suitable for sessions.”
Where we see opportunities
Despite all the money flowing into this space, major gaps persist. We believe that the only patients that do have at least some options are the wealthier patients willing to pay out-of-pocket living in big cities. Some are also benefiting from mental health offerings via their employers, including from Lyra, Spring Health, Modern Health and Ginger. But it remains the case that most counties in the United States don’t have a single psychiatrist. Ben’s perspective is that the largest gaps involve geriatric care, serious mental illness and pediatrics.
Geriatrics: We haven’t seen scaled solutions for people entering the early phases of dementia. These people and their families often want the patient to live independently for as long as possible but it is rare to meet a family in this situation who are satisfied with the mental health care being delivered to them. There are also a host of common issues that arise related to approaching the end of life unrelated to dementia. These people aren’t necessarily facing a terminal condition but are reflecting on the meaning of their life and how to make the most of their final years. It remains a challenge to find an experienced provider who can assist with these issues.
SMI: In the more severe mental illness category, there are Medicaid and grant-funded community mental health centers providing mental health and social care, but these centers are often poorly funded and operate more or less independent of one another leading to widely variable care quality. Additionally the demand for community mental health centers far outstrips the availability leaving large numbers of SMI patients without access to care at these centers. It’s promising to see a handful of companies emerge here including Brightside, Equip, NOCD and Akin.
Kids and teens: Pediatric care has maybe the most acute access issues of any part of the mental healthcare continuum. There are just very few pediatric specialists in the mental health field. COVID-related increases in suicidal ideation, depression, anxiety and difficulty at school have brought newfound awareness of the lack of access for kids and their families. This is a longstanding problem. When Ben was in psychiatric training, it was common to see kids and their families wait upwards of a year to see a specialist. And that was in Boston, where there is much more access to care than other places. We don’t foresee a large, near-term increase in the number of providers available, so the access issue has to be addressed by matching patients to the right level of care. Whenever possible, there should be an openness to moving kids away from the most highly trained providers and towards coaching in order to leave space for the most complex patients to be matched with the most sophisticated providers and practices. Employers and school systems are also increasingly willing to pay for these services, which is a positive sign. Studies are increasingly finding that most parents won’t seek care for their own mental health conditions if their child is struggling. So it’s increasingly important to offer both. A new cohort of companies to watch that is emerging in this space include Brightline (backed by GV), Little Otter, Joon, Charlie Health and Daybreak.
Groups: Another area where we see an opportunity is to bring together patients. We’d love to see more companies take advantage of the opportunity to match patients that can relate to each other because they’re going through similar struggles (a divorce, a cancer diagnosis, a challenge with a child, sick parents, etc.). We see it more in the substance use space with start-ups like Marigold Health that specialize in building better chat support groups, and we’re starting to see that dynamic leveraged via companies like Pace. The challenge will be reimbursement, as many of these companies are starting off with a cash pay option.
Ultimately, what we’d also like to see shift is the thinking of behavioral health as somehow separate from the rest of human health. We think we need to reframe our understanding of behavioral health. It’s not separate from our physical health and wellbeing; it’s intertwined. So we have been excited to see companies emerge in musculoskeletal, weight management, women’s health that view behavioral health as a core part of their solution.
What are the biggest things that need to change?
While we’re on our soapbox, here’s three things we’d love to see: more specialization, consolidation and payment reform.
Specialization can be a useful tool for providing high quality specialized treatments as exist for conditions like OCD, PTSD, borderline personality disorder, phobias, or severe anxiety. Treatments for these conditions require significant experience to deliver effectively and are meaningfully different from the more common therapy modalities or medications used for more common conditions like depression and mild to moderate anxiety.
For more common conditions, consolidation is the trend - and that can be positive. At the start of treatment, mental health professionals generally ask patients or primary care doctors to request care from a specific type of provider. A patient knows they need help in some way, but it’s a bit absurd to ask a newly depressed person to go to a directory and decide whether they need meds or therapy. If they need therapy, is that supposed to be from a coach? Social worker? PhD? Do psychiatrists even offer therapy? Consolidation, whether truly providers under the same roof or via some type of digitally unified care team offers the prospect of a more coherent front door.
In a consolidated system, an intake can be completed and recommendations made for what type of provider would make the most sense, and ideally which specific provider is best matched to a given patient based on a combination of their condition and preferences (gender, race, language…). When unified into a larger system, a patient could see a prescriber when medications are needed or not working, then move to a therapist, and then to a coach or peer when they’re feeling better, and care could be combined or escalated in the opposite direction.
As part of the movement towards mental health care systems, rather than individuals, payment also needs to change. Part of the reason a patient isn’t referred from one mental health provider to another is because of the economic incentives. In the current system of fee-for-service payments, all the wrong behaviors are incentivized. Providers are rewarded for seeing as many patients as possible during a given day of clinic. Since new patients, as well as complex patients, take more time usually without commensurate increases in payment, providers are incentivized to see their least complex patients as frequently as possible. That leads to inconvenient, overly frequent care for generally well people, and a lack of access to people looking to establish care and/or with complex psychiatric conditions. In principle, providers should be incentivized to work as teams to deliver care that meets the needs of a given patient. Finding the right approach to actualizing those sorts of payments will take significant experimentation on how to measure success, as well as how to pay providers to reward success rather than volume. We suspect the right solution will include providers being mostly salaried with small bonuses paid when patients measurably improve.
So that’s it folks. If you have thoughts on this month’s newsletter, we’d love to hear from you!