Over the past few years, Cerebral telehealth has been one of the fastest-growing names in digital mental health. Founded in 2019, the company quickly became a major player by offering therapy, counseling, and medication management services virtually. During the pandemic, when demand for mental health care surged and regulations temporarily loosened, Cerebral’s growth seemed unstoppable. But that era has shifted dramatically.
In late August, Cerebral executives, including CEO David Mou and President Jessica Muse, announced a major restructuring effort. The biggest change: a 20% workforce reduction. In town hall meetings reported by Business Insider and confirmed by Behavioral Health Business, leaders admitted the company had grown too quickly and must now focus on sustainability. This marks a major turning point for Cerebral telehealth, which had built much of its rapid expansion around temporary regulatory flexibilities and heavy marketing investments.
The Rise of Cerebral Telehealth
At its peak, Cerebral telehealth capitalized on COVID-era prescribing rules that allowed clinicians to prescribe certain medications via telehealth, something that previously required in-person visits. This gave Cerebral a competitive edge in acquiring and retaining patients quickly. The company also invested heavily in advertising to drive growth, positioning itself as a convenient, accessible mental health solution.
The approach worked—at least at first. Cerebral attracted hundreds of thousands of patients, gained widespread recognition, and secured major rounds of funding. But its reliance on controlled substance prescribing left it exposed to regulatory, reputational, and operational risks.
Mounting Scrutiny And Legal Challenges
As Cerebral telehealth grew, so did scrutiny. Over time, the company faced:
- Federal investigations into its prescribing practices
- A congressional probe into the handling of controlled substances
- A civil lawsuit from a former executive raising concerns about operations
- Pushback from insurers and pharmacies, some of which reevaluated their partnerships with the company
In May, Cerebral announced it would stop prescribing most controlled substances, effective October 15. While this move was designed to reduce regulatory risk, it also slowed demand, creating significant financial pressure on the company.
What Leaders Told Employees
At the town halls, Mou and Muse admitted that Cerebral telehealth had overspent on advertising and expanded too quickly in an effort to seize market share. Muse told employees the company was now prioritizing “very sustainable smart growth.” While some staff criticized the company’s direction, Muse pushed back against claims that the business was motivated by greed. She highlighted that under founder and former CEO Kyle Robertson, the company often prioritized patient access even when it wasn’t profitable.
Still, leadership made clear that the future requires a different approach—one built on sustainable growth rather than rapid expansion.
What’s Changing At Cerebral
The restructuring goes beyond layoffs. Among the changes announced:
- Cutting 20% of staff across corporate, clinical, and support teams
- Sunsetting services such as care counseling, coaching, and weight management
- Reducing company retreats and other nonessential spending
- Scrapping clinical trials and halting plans for U.K. expansion
These decisions reflect Cerebral’s effort to focus on core offerings while cutting costs in areas that are no longer financially viable. For Cerebral telehealth, this pivot marks a shift away from aggressive scaling and toward operational discipline.
The Bigger Picture For Telehealth
Cerebral’s story is emblematic of challenges across the telehealth sector. The pandemic created a surge in demand and loosened regulations, fueling explosive growth for startups. But as public scrutiny increases and competition intensifies, many companies are discovering that their models need recalibration.
Cerebral telehealth shows how reliance on regulatory flexibilities and high advertising spend can create short-term gains but long-term vulnerabilities. Even though federal COVID-era prescribing flexibilities remain in place, Cerebral chose to halt controlled substance prescriptions, underscoring how reputational concerns can outweigh regulatory allowances.
Lessons For The Industry
From the rise and retrenchment of Cerebral telehealth, several key lessons emerge:
- Growth must align with compliance – Healthcare startups cannot outpace the regulatory environment without consequences.
- Patient trust is essential – Public perception can determine success or failure in mental health care.
- Advertising spend must match returns – Outspending revenue on marketing is not sustainable.
- Diversification matters – Relying too heavily on one service line creates fragility when conditions change.
Looking Forward
For Cerebral telehealth, the future now hinges on rebuilding stability. Mou and Muse appear committed to steering the company toward smarter, more measured growth while cutting unnecessary programs. Whether this approach can restore financial health and public trust remains to be seen.
The shift also signals a broader reckoning for digital health companies that scaled rapidly during the pandemic. The next phase will test whether they can adapt to new realities, deliver consistent care, and operate sustainably in a competitive marketplace.
Conclusion
Cerebral’s journey from rapid rise to painful retrenchment highlights both the potential and the pitfalls of telehealth in behavioral health. While Cerebral telehealth made mental health services more accessible to thousands of patients, it also revealed the risks of overexpansion, regulatory reliance, and aggressive spending.
The company’s pivot toward sustainability may allow it to endure, but it also serves as a cautionary tale for other startups: in healthcare, success requires more than speed—it demands trust, compliance, and balance.
