2023 is shaping up to be a year of transition for the behavioral health industry. With the COVID-era public health emergency (PHE) coming to an end and economic headwinds affecting the global economy, behavioral health companies are navigating a complex landscape. The relaxed regulatory environment of the PHE allowed many digital and telehealth providers to expand rapidly, and as permanent rules are put in place, these companies involved in digital mental health 2023 will finally receive clarity on their long-term operational models.
At the same time, federal and state regulators are keeping a close eye on companies that deal with controlled substances, particularly digital mental health providers. Past scrutiny of companies such as Cerebral and Done for their prescribing practices has not disappeared, and this year, watchdogs will likely continue evaluating the industry closely. For companies, balancing innovation with compliance is no longer optional—it is essential for survival and credibility.
Regulatory Changes and Digital MAT Providers
During the PHE, the Substance Abuse and Mental Health Services Administration (SAMHSA) allowed clinicians to initiate opioid use disorder (OUD) treatments such as buprenorphine via telehealth, while the DEA temporarily lifted the in-person assessment requirement mandated by the Ryan Haight Act. These changes opened the door for digital-first medication-assisted treatment (MAT) providers and contributed to rapid growth in telehealth mental health services.
As the PHE winds down, a new federal rule proposal could expand these flexibilities. The proposal would allow authorized clinicians to initiate buprenorphine treatment using audio-only or audio-visual technology and even permit methadone treatment through telehealth in specific scenarios. Combined with the bipartisan Mainstreaming Addiction Treatment (MAT) Act, this provides much-needed clarity and opportunities for digital MAT providers. These regulatory shifts are a key factor driving digital mental health 2023 growth and adoption trends.
Focus Shifts to Higher-Acuity Care
The COVID-19 pandemic brought mental health to the forefront of public awareness, resulting in significant investments in startups and initiatives. Initially, most of these companies targeted mild to moderate mental health conditions, leaving serious mental illness (SMI) largely underserved.
In 2023, there is a clear shift toward higher-acuity care. New entrants such as Amae, Vanna Health, and firsthand are entering the space with community-based models aimed at patients with SMI. Established providers are also expanding offerings to treat more complex conditions. For instance, digital provider Quartet Health launched a virtual clinic focused on patients with moderate and serious mental illness, demonstrating how digital platforms can complement—but not replace—hands-on care. This expansion into acute care is one of the defining aspects of digital mental health 2023.
Experts emphasize that managing SMI effectively requires a hybrid approach. “Given the complexity and nature of SMIs, it’s always got to be high tech combined with high touch,” said Pushkar Suresh Joshi, chief strategy and science officer at One Mind Accelerator. Digital tools can aid monitoring, engagement, and certain aspects of care delivery, but hands-on support remains central to recovery. Innovation, partnerships, and specialized solutions for high-acuity patients are central to the outlook for digital mental health 2023.
Autism and Pediatric Behavioral Health Remain Hotbeds for Investment
The autism sector continues to attract private equity and strategic investors, particularly in Applied Behavior Analysis (ABA) therapy providers. Deal activity has steadily increased over the last decade, with private equity-backed companies now entering their typical five-year hold periods, making exits and recapitalizations more likely in 2023. Past transactions, such as Arsenal Capital Partners’ acquisition of Hopebridge LLC and the sale of The Stepping Stones Group to Five Arrows Capital Partners, highlight the ongoing consolidation trend in this space.
Pediatric behavioral health also remains a critical area of focus. The pandemic revealed significant gaps in care for children, with long waits and boarding incidents demonstrating the need for expanded services. Telehealth solutions, including offerings from Meliora Health and InStride Health, aim to fill these gaps, and they are a growing component of digital mental health 2023 innovation. Federal and state governments are also investing in child-focused behavioral health initiatives, such as Maryland’s $100 million commitment to Sheppard Pratt’s children’s hospital and workforce development programs.
Workforce Challenges and Unionization
The behavioral health workforce remains in short supply, giving providers leverage but also creating operational challenges. Large operators such as Universal Health Services and Acadia Healthcare have seen some improvements in workforce availability, but systemic shortages persist.
Labor tensions have become more visible in recent months. Kaiser Permanente behavioral health providers in Northern California achieved a new four-year contract after a 10-week strike, and a similar strike in Hawaii has lasted over 16 weeks. Unionization and labor advocacy are increasingly influencing the behavioral health landscape. Social media has amplified provider concerns about workloads and treatment conditions, a recurring theme in discussions of digital mental health 2023.
Government Watchdogs Remain Vigilant
Digital behavioral health companies will continue to face scrutiny in 2023. Cerebral endured a congressional probe, DEA review, and a U.S. Attorney investigation in 2022. Other companies, including BetterHelp and Talkspace, were also examined by U.S. senators over privacy concerns and prescribing practices. The exposure of companies sharing sensitive user data with tech giants further underscores the need for strict compliance and transparency.
The DEA has taken action against companies seeking to exploit relaxed controlled substance regulations, such as questioning Adderall manufacturers over increased production requests. As digital MAT and telehealth services continue to expand, these regulatory developments will remain a central factor shaping digital mental health 2023 strategies.
Mergers, Acquisitions, and Consolidation
M&A activity in behavioral health, though slower in 2022 than 2021, remains robust. The sector continues to be fragmented, offering opportunities for consolidation. Digital behavioral health companies facing market setbacks may be acquired at favorable valuations, while small private practices remain targets for larger operators or private equity firms.
Behavioral health deal flow has historically remained strong. In the first three quarters of 2022, The Braff Group reported 151 transactions—likely the second-highest annual count ever. With demand continuing to rise and the industry maturing, 2023 is expected to be another active year for acquisitions. Companies that can strategically position themselves for growth in the digital space will likely dominate the digital mental health 2023 landscape.
Big Moves in Outpatient Behavioral Health
UnitedHealth Group’s acquisition of Refresh Mental Health highlighted the potential for major strategic moves in outpatient behavioral health. Refresh’s integration into the Optum umbrella aimed to align behavioral and physical health under one coordinated delivery system. With the majority of outpatient mental health care still delivered through private practices, opportunities for other “Refresh-like” deals remain. Companies like CVS Health, through its insurance and healthcare operations, and Walgreens Boots Alliance are potential contenders to make large-scale moves in 2023.
REITs Expand into Behavioral Health Real Estate
Real estate investment trusts (REITs) are increasingly targeting behavioral health properties. CareTrust REIT and Sabra Health Care REIT have reshaped portions of their portfolios to include addiction treatment and behavioral health facilities. Behavioral health now represents a growing share of their assets, allowing operators to focus on care delivery rather than real estate management. This trend is expected to continue in 2023, supporting the expansion of digital mental health 2023 initiatives and physical care facilities alike.
Looking Ahead
Behavioral health in 2023 is set to be transformative. Regulatory clarity around telehealth and MAT, a shift toward higher-acuity care, pediatric and autism investments, workforce issues, and M&A activity are all reshaping the industry. Digital innovation, combined with partnerships and strategic consolidation, will define how providers navigate this evolving landscape.
For providers, investors, and policymakers, staying agile and strategic is essential. Those who can navigate regulatory changes, embrace innovation, and respond to workforce and patient needs will lead the way in digital mental health 2023, setting the standard for the industry’s future.
