In an industry where aggressive expansion is often seen as the key to success, LifeStance Health (Nasdaq: LFST) is taking a decidedly more cautious and strategic approach to its growth. After closing over 80 centers in the past year, the outpatient mental health provider is recalibrating its healthcare facility expansion strategy. Instead of focusing on rapid growth, LifeStance is prioritizing sustainable and profitable expansion, with a keen focus on optimizing its existing infrastructure.
Shifting Focus to Sustainable Growth
In 2024, LifeStance revised its earlier expectations for healthcare facility expansion, reducing its target for new facility openings significantly. Originally, the company had aimed to open up to 20 de novo (brand new) locations by the end of the year. However, that estimate has now been adjusted to no more than 10. This shift represents a conscious decision to focus on quality over quantity in its growth strategy. Dave Bourdon, LifeStance’s Chief Financial Officer, explained the change during the company’s Q2 earnings call, saying, “These updates reflect our increased emphasis on profitable growth and disciplined capital deployment.” The shift to a more measured approach reflects the company’s recognition that rapid healthcare facility expansion can be unsustainable, especially in a competitive healthcare landscape.
The decision to scale back the pace of growth comes at a time when many companies in the healthcare and outpatient sectors are under pressure to expand quickly to capture market share. Yet, LifeStance is taking a different route, ensuring that its healthcare facility expansion remains profitable and that resources are being deployed efficiently. This more conservative growth strategy speaks volumes about LifeStance’s commitment to building a resilient, long-term business.
Strong Financial Performance Despite Modest Expansion
Despite slowing down its healthcare facility expansion plans, LifeStance is still performing remarkably well. During its Q2 earnings call, the company reported a 20% year-over-year revenue growth, reaching $312 million. This impressive performance, despite fewer new facility openings, highlights the effectiveness of LifeStance’s operational strategies and its ability to drive growth through existing locations.
A significant driver of this growth has been an increase in both revenue per visit and overall visit volume. In Q2, the company saw a rise in visit volume of 15%, with a total of 2 million visits. This surge was primarily attributed to clinician growth—LifeStance added 118 net clinicians during the second quarter, bringing its total clinician base to 6,984. More clinicians meant more appointments, resulting in higher overall visit volumes.
While the company’s healthcare facility expansion strategy for 2024 has been scaled back, the growth in visit volume and clinician numbers illustrates that LifeStance is still seeing significant demand for its services. This robust performance even in the face of more conservative expansion is a testament to the company’s operational efficiency and the effectiveness of its existing facilities.
Optimizing Existing Facilities and Local Market Growth
LifeStance’s leadership remains confident in the company’s current footprint. Bourdon noted that the company had engaged in “right-sizing” its operations last year by consolidating some centers, which has led to a more efficient and effective network of facilities. This right-sizing initiative has allowed the company to streamline its operations and create a stable platform for growth in the future.
“We feel good about the footprint that we have right now,” Bourdon emphasized. “There is still a lot of capacity in our footprint.” This capacity refers to the ability of LifeStance’s existing locations to handle additional patient visits without the immediate need for new facilities. While the company plans to open fewer new locations in the near term, it still sees opportunities for growth within its current footprint.
The company’s healthcare facility expansion in 2024 will be centered on areas where it has already successfully recruited clinicians and achieved high patient utilization. These high-demand regions will be where LifeStance focuses its efforts for new de novo openings. By targeting specific local markets where demand is high and clinician recruitment has been successful, LifeStance hopes to maintain its growth trajectory without the need for a large-scale healthcare facility expansion.
As LifeStance looks to 2025 and beyond, its healthcare facility expansion strategy is likely to remain similarly conservative. The company anticipates that it will continue to focus on modest facility openings while continuing to build on the solid foundation it has established. “I would expect it to be more of the same next year, where we’ll have a modest amount of de novo ads while we continue to grow into our footprint,” Bourdon said, reinforcing the company’s approach of organic growth within existing markets.
A Subtle Shift Toward In-Person Care
While virtual care has grown significantly in recent years, especially after the pandemic, LifeStance is slightly shifting its focus back toward in-person visits. According to the company’s latest reports, there was a 1.5% increase in in-person visits compared to virtual ones. Currently, virtual visits still make up a substantial portion of the company’s care model, with around 71% of visits being virtual and 29% in-person.
This gradual shift suggests that while telehealth continues to play a crucial role in making mental health care more accessible, LifeStance recognizes that in-person visits are still highly valued by certain patient populations. Some individuals may prefer or require face-to-face interactions with clinicians, and LifeStance is working to strike the right balance between virtual and in-person care to best serve its patients.
The 1.5% uptick in in-person visits may seem small, but it reflects the company’s ongoing efforts to adapt to patient needs and evolving healthcare trends. With mental health services increasingly moving into the digital realm, LifeStance’s ability to blend virtual care with in-person visits positions it as a flexible and forward-thinking provider.
Streamlining Operations for Efficiency
In addition to optimizing its healthcare facility expansion strategy, LifeStance is also focusing on improving operational efficiencies. The company recently introduced a new initiative designed to standardize processes across the organization. This initiative focuses on standardizing job descriptions, staffing levels, and resources across different local markets to ensure consistency and streamline operations.
The goal of this initiative is to create a more cohesive and efficient work environment, making it easier for clinicians and staff to operate across different locations. By improving standardization, LifeStance hopes to reduce redundancies, enhance operational workflows, and create a more seamless experience for both staff and patients. This operational focus also ties into the company’s larger efforts to recruit and retain top-tier clinicians in an increasingly competitive labor market.
The standardization of processes can also contribute to better patient care by ensuring that all locations follow the same best practices and operational guidelines. This is particularly important as LifeStance continues to expand its clinician base and adds new facilities to its portfolio, as it helps maintain the consistency and quality of care that the company has become known for.
Looking to the Future
As LifeStance moves forward with its measured approach to growth, it is clear that the company is focused on building a sustainable, long-term business. By prioritizing profitability, optimizing its current footprint, and focusing on operational efficiencies, LifeStance is positioning itself to remain a strong player in the outpatient mental health space.
While the company’s healthcare facility expansion strategy for 2024 may be more conservative than originally planned, LifeStance is seeing solid financial results that demonstrate the success of its approach. The company’s commitment to balancing growth with fiscal responsibility and maintaining high-quality patient care ensures that LifeStance is well-positioned to navigate the ever-changing healthcare landscape.
As the company continues to refine its strategy and expand its footprint in key markets, LifeStance is poised for continued success, both in terms of financial performance and its ability to meet the mental health needs of an increasingly diverse and growing patient population. In a rapidly evolving industry, LifeStance’s commitment to sustainable and thoughtful growth may prove to be a model for other healthcare providers looking to strike the right balance between expansion and operational efficiency.
