The number of joint venture (JV) partnerships between hospitals and behavioral health care providers is steadily increasing, despite the often-lengthy process of finalizing these deals. Experts in the field predict that this trend will continue as hospitals seek to strengthen their behavioral health services by collaborating with specialized providers. Hospital partnerships in mental health are becoming a crucial strategy for expanding access to behavioral health care.
According to William Teague, managing director of VMG Health, while challenges in recent years may have slowed the pace of deals, the overall model of hospital partnerships in mental health is expanding. Teague has played a role in advising numerous healthcare companies on JV strategies, helping to negotiate several successful partnerships. Major behavioral health JVs in recent years include Acadia Healthcare’s partnership with Tufts Medicine and Universal Health Services’ (UHS) collaboration with Lehigh Valley Health Network. These partnerships have been on the rise since 2019, with large-scale providers like UHS and Acadia bringing capital and clinical expertise to acute care systems that lack behavioral health specialization.
The Need for Behavioral Health JVs
Hospitals often prioritize capital investment in specialties like cardiology over behavioral health, leading them to seek external partners for funding and operational support. Hospital partnerships in mental health allow healthcare systems to bring in necessary expertise without diverting resources from other essential services. Shelah Adams, vice president of corporate development at UHS, noted that hospitals recognize the need for behavioral health services but often lack the financial and operational resources to develop them independently. UHS, which operates over 400 facilities across the U.S., Puerto Rico, and the U.K., has responded by forming JVs with hospitals needing behavioral health expertise. Currently, UHS has 15 JVs, with 40-50 additional partnerships in the pipeline, including collaborations with institutions like Penn Medicine.
One of the key reasons hospital partnerships in mental health are attractive to hospitals is that nonprofit health systems frequently lack a structured discharge plan for behavioral health patients. As Michael Tierney, managing director at Fifth Third Securities, explained, behavioral health is not typically a core competency for nonprofit health systems, making JVs an appealing solution. Beyond UHS and Acadia, other providers like US HealthVest have also embraced JVs as a way to expand their reach and impact.
Challenges in Establishing JVs
Despite growing interest, hospital partnerships in mental health take time to establish. Compared to traditional mergers and acquisitions, the timeline for forming a JV can be lengthy, with the shortest deals taking at least three years to finalize. Adams cited a partnership with Trinity Health Michigan that required a three-year process to obtain necessary permits and approvals. These ventures often require new licenses and certificates of need, adding to the complexity.
Another challenge is structuring the deal itself. While an 80-20 equity split between providers and hospitals is common, some providers, like UHS, prefer a 51-49 structure to ensure mutual commitment. Branding, professional services agreements, and operational control are additional points of negotiation. Some hospitals express initial skepticism about working with for-profit entities like UHS, questioning their motives and quality of care. However, Adams emphasized that hospital partnerships in mental health have proven to bring high-quality services to communities, leading nonprofit hospitals to recognize their value.
The Economic and Clinical Benefits of JVs
Despite the complexity of establishing these partnerships, the benefits of hospital partnerships in mental health are clear. Hospitals that partner with experienced behavioral health providers can expand their service offerings without bearing the full financial and operational burden. These partnerships allow hospitals to leverage the expertise of behavioral health specialists while sharing financial risk and maximizing patient care.
For many nonprofit hospitals, behavioral health is not a primary focus, and their existing resources for mental health care are often insufficient. By joining forces with providers like UHS, Acadia, or US HealthVest, hospitals can ensure that patients receive the necessary care beyond the emergency room. This improves patient outcomes, reduces readmission rates, and strengthens the hospital’s overall service capabilities.
JVs also help hospitals navigate the growing demand for mental health and substance use treatment. With increasing awareness and policy focus on mental health care, hospitals that invest in hospital partnerships in mental health position themselves to meet future healthcare needs effectively. These collaborations ensure that hospitals remain competitive while addressing critical gaps in mental health services.
The Future of Behavioral Health JVs
Looking ahead, industry experts anticipate continued expansion of hospital partnerships in mental health. While most current partnerships focus on inpatient care, Tierney predicts that more hospitals will explore outpatient solutions. This shift could enable hospitals to offer comprehensive mental health services, including intensive outpatient programs (IOPs) and partial hospitalization programs (PHPs), to better serve their communities.
Teague also foresees an increase in the number of players pursuing JV models. Currently, only a handful of companies, such as UHS and Acadia, dominate this space. However, as more health systems recognize the value of these partnerships, new providers may enter the market, offering additional options for hospitals seeking behavioral health expertise.
As the healthcare landscape continues to evolve, the integration of behavioral health services into traditional hospital settings will become increasingly important. Hospital partnerships in mental health provide a practical, scalable solution for hospitals looking to enhance their behavioral health offerings while maintaining financial sustainability. While the road to establishing a JV may be long, the benefits—both economic and clinical—make these partnerships a worthwhile investment for the future of healthcare.
