Moving from Senior Care to Behavioral Health is not easy. While stories of success circulate, especially in the Hasidic community, more providers fail than succeed. Senior care is all about controlling costs, but finding residents and filling beds is relatively easy. This is not the case with behavioral health.
In fact, there are very few similarities between the two, something many who attempt to make the transition don’t understand. This article will explore these key differences so that new operators can be well prepared for the challenges they will inevitably face.
Challenge #1: Different Business Dynamics
Diverse business dynamics create some significant differences that new entrants must be aware of. In senior care, once a resident enters your facility, it’s unlikely they will leave for years. Either they pass away or the family moves them to another facility. But the majority of the time, you have a resident for years.
In behavioral health, patients stay for 4-60 days. Depending on the insurance a provider accepts, the following are some average lengths of stay:
Detox: 4-7 days
Residential: 12-23 days
PHP: 7-14 days
IOP: 18-20 sessions spread out over 4-6 weeks
That means, to stay financially solvent, you need to be constantly acquiring patients in behavioral health. In senior care, there are times where you may only need a couple patients a month to stay full. In behavioral health, it’s a revolving door. Providers are engaged in an unending search for patients.
Not only are lengths of stay shorter, but patients leave early much more frequently in behavioral health. They often didn’t want to be there in the first place. Many patients are pushed in by family, jobs, or the courts. If they’re not happy with your services, your facility, or even your food, they are prone to simply walk out the door. The terminology for this in the field is AMA or leaving “Against Medical Advice.” Standard AMA rates for most providers are 20-25%. For new providers, because they have not yet figured out all the moving pieces needed to successfully retain patients through program completion, AMA rates are often around 30%. As we’ll discuss later, because marketing costs to acquire a patient are so high, this is a very big deal with a large impact on financial stability.
Systems and processes also must be more streamlined in behavioral health than in senior care. In senior care, you have tours for marketing, meals, nurse check-ins, and the occasional planned activity. There isn’t much to scheduling outside of that.
In behavioral health, providers have to move very fast. If a patient calls, they usually want to be admitted within 24-48 hours. If you’re not able to accept them that quickly, they’ll go somewhere else. This is especially true if you decide to take Medicaid. We’ve worked with new providers coming from senior care backgrounds, and they often had systems and processes set up to schedule patients within 1-2 weeks. They couldn’t understand why their inquiry-to-admission rate was so low, but slow admissions processes were the primary culprit.
Again, as we’ll discuss more in the marketing section, patient acquisition in behavioral health is constant. Depending on the size of your program, that might mean you need to be able to admit 3-5 patients a day on occasion. Think about your senior care experience. Were you equipped to handle 5 admissions in a single day? And these admissions often overlap. In senior care, you can work with families to schedule things out. In behavioral health, there is often an urgency to seeking care, so scheduling patients can be very difficult. It is common to have 2-3 patients all waiting in the lobby to admit around the same time. And, if you leave them sitting in the lobby too long, they’ll walk out.
Challenge #2: Marketing, Patient Acquisition, and Getting Reimbursed
In senior care, sophisticated marketing is, by and large, non-existent. Particularly for those that accept Medicaid, senior care facilities fill themselves with little investment or effort in marketing. Most will have maybe one Director of Outreach and occasionally supplement by buying qualified leads from A Place for Mom. This is only a small fraction of what’s needed to attract patients to a behavioral health program.
First off, A Place for Mom type marketing is illegal in the behavioral health space. Any arrangement predicated on paying for patients runs afoul of anti-kickback (EKRA) and SUPPORT Act statutes. Additionally, selling patients, their information, or paying a third party for calls is considered unethical in the field. If other providers, who are often a large source of referrals, discover you are engaging in any of those three activities, you will be blacklisted. Word will quickly get around and your referrals will dry up. Since 70% of admissions for the average behavioral health provider come from community referrals, this is a death knell for any provider.
Providers also need to understand patient dynamics related to intake. For example, Medicaid provides a steady flow of residents in senior care. This is not the case in behavioral health. While there are many Medicaid patients who seek detox, many hospitals will handle this process rather than refer out. Medicaid patients do not want intensive outpatient options as it is too burdensome for them. Instead, they are most likely to seek out MAT or once-a-week outpatient services.
A provider may say, “We’ll just add on MAT as a service.” Bad idea. MAT clinics are a completely different setup and revenue model than outpatient care. Now you’re talking about federally regulated, high volume, low margin, prescription-focused care. This is why the two businesses - MAT clinics and Outpatient Treatment - are separate business models that you rarely find housed under a single roof.
If you choose to try for the commercial insurance route rather than Medicaid, that’s an entirely separate marketing model yet again. The average cost of a single call from Google Ads is $200 for higher levels of care for both SUD and mental health. A decent call team, one who always answers the phone and has been trained on consultative selling, will convert 1 in 30 Google Ads calls. That’s a $6,000 cost per admission! For a breakdown of how Google Ads/PPC works in behavioral health, see our article here.
This means starting budgets of tens of thousands of dollars a month that must be built into the pro forma. The alternative is to invest smaller amounts in community outreach and SEO, but then wait 6 months to start seeing results. Either way, upfront capital investments are required to either fund operations during long periods of low census or to drive high census with equally high marketing costs.
Also, keep in mind that it takes most providers at least 6 months to get in-network, so that’s 6 months that a provider can only accept OON or cash pay, which very few people are willing to do. If a patient can go to someone else reasonably nearby, why would they pay double or triple the out of pocket cost to go to your facility? Unless there is something truly special about your program that’s different than any other program in the area, they won’t. This is another driver of low census for new providers.
Finally, there is the matter of getting paid. You absolutely have to outsource billing to a third party vendor in the beginning. Otherwise, you won’t get paid on time. Many of our smaller clients try to do billing in house in order to “save money”, but this always backfires. Payers are a total pain in behavioral health, especially for out-of-network payments. Expect to make mistakes and wait six months from the first date that you provide service to finally getting paid for the first time. A billing company vendor will reduce that wait time to 45-60 days and is worth the 6%.
Challenge #3: Staffing Costs
Staffing a behavioral health provider is very challenging for any level of care above IOP. Unlike senior care that mostly relies on an unskilled workforce of aides supported by nurses, behavioral health needs both licensed medical professionals and behavioral health professionals on site, actively engaging with patients most of the day. For detox and residential, most states require 24/7 medical staff on site.
As most operators know from senior care, nursing staff are in short supply, therefore driving high salaries. The same is true for licensed therapists. Since licensed therapists drive the majority of your billable hours, constant recruitment and retention efforts are required to attract these staff. Also, like nurses, therapists tend to be fickle with high turnover rates, about 12-18 months on average.
Staffing costs are manageable when a program is at capacity, but, with marketing being so difficult, many programs often struggle to stay full.
Behavioral health providers also need a full-time phone person. This isn’t a secretary or office admin who also answers the phone, this is a full-time position. Their only job is to answer the phone. In behavioral health, if you don’t answer the phone, the patient will call and admit somewhere else. They do not wait for callbacks.
When you’re spending so much on marketing to generate phone calls, every missed call is a missed opportunity for admission. And missed opportunities are not something new providers can afford.
We’ve had a number of clients attempt to move from senior care to behavioral health and phones are an afterthought. Usually, the person assigned to answer the phone is also tasked with a hundred other admin tasks, as is common in senior care. This doesn’t work in behavioral health. Someone needs to be paid to manage phones as their number 1 priority AND waterfall call routing needs to be set up for secondary staff to answer. Often the owner themselves will take calls in a new program if the primary staff member is currently on another call.
Challenge #4: Patients and Their Problems
There are always fires in a behavioral health program. You’re dealing with people that have substance use or mental health issues. They can be strung out, exhausted, agitated, and generally give staff a hard time.
In senior care, you’ll have routine medical issues. For anything more serious, you call an ambulance and that’s the end of it. Some residents may have regular complaints, but the staff can be trained to handle those. In behavioral health, patients are constantly threatening to leave. Unruly or disruptive patients create complaints from other patients upset by their behavior. Then they may want to leave as well, leading to a potential mass exodus.
Managing the milieu is a constant need for behavioral health providers. Staff spend a lot of unplanned time dealing with the constant issues that arise. This is one of the factors that also drives turnover among staff.
Be Prepared for a Long Road
Because many operators with experience in senior care are not prepared for the above differences, they often think opening a behavioral health program is as easy as opening the doors and hiring a couple staff. This is not the case at all. Most behavioral health providers take at least 18 months to break even from an initial investment standpoint. That’s assuming they do everything right, which most don’t. The learning curve is steep.
Particularly from the Hasidic community, operators are used to being passive owners that largely manage finances and costs. This is not possible in behavioral health unless you’re opening a large residential. Anything under 50 beds, and definitely PHP/IOP levels of care, needs a heavily engaged owner for the first couple of years. This owner acts as an Executive Director – hiring staff, building systems and processes, managing all the HR issues, and often directly engaging with patients.
For PHP/IOP, they simply don’t make enough for an Executive Director to be hired in the first 18 months as the program works toward profitability, if it’s ever able to afford one. Most PHP/IOP owners are owner-operators for that reason. We’ve had numerous clients try to manage from afar, building facilities in the midwest or South Florida, then trying to manage from New York or New Jersey. They either end up closing in the first two years, or bleed a ton of money until they figure out they have to actively run the business.
For an owner to have a more passive role in a PHP/IOP, they generally need to own 3-4 locations, at which point revenue is high enough to justify the cost of hiring a permanent Executive Director.
Aside from the mismatched expectations coming from their senior care experience, new entrants to behavioral health often have a false confidence due to a lot of misinformation about the demand for behavioral health services. Investment decks abound, expounding the fact that only 11% of patients that need services receive care. This is untrue. While many diagnosed with a behavioral health disorder qualify for services, they do not want them, a trend that’s been consistent for decades.
Programs will not fill themselves without significant investments in marketing. Here are some simple budgets that will shock most senior care providers.
The average 70-bed residential behavioral health provider that takes only out-of-network insurance will spend $500,000 a month on marketing.
Note that all programs are out-of-network for the first six months until they are accredited and can start negotiating insurance contracts. This is a big reason for the 18-month-to-break-even time horizon.
A 30-bed in-network residential program will spend $75,000 a month on marketing and outreach.
A small in-network IOP with two group rooms will spend $50,000 a month.
A small IOP that accepts Medicaid will spend $12,000 a month for at least the first year.
These numbers are often shocking to senior care operators since they traditionally invest so little in marketing. However, without those budgets built into the pro forma, providers will fail. New providers often state that, “Surely there is a way to operate without such high marketing budgets.” We have $2 billion in behavioral health providers across the country, big and small, new and old. For every provider that was sure they could get their program off the ground without the above investment levels, they either folded up shop, or ended up making the investment six months down the road as their program remained empty.
The bottom line is, do not take a happy-go-lucky approach to opening a behavioral health program. It will be expensive and it will take a lot of your time working in the business. There will be long hours, many questions, and many challenges. We’ve outlined the main ones that operators need to know in this article, but a plethora of small challenges arise every day.
Remember, behavioral health providers are constantly closing across the country. While you may have heard of successful exits, we can 100% guarantee these are the minority. Not a day goes by that we don’t hear about some small provider closing down somewhere. Behavioral health is not an easy business. If you choose to embark on this journey, we hope this article will help you start things on the right foot.
If you’re interested in further guidance or for surefire marketing that works, get in touch with us at 800-396-9927 or engage@27aa2dbd3f.nxcli.io.