For many years, Partial Hospitalization Programs (PHP) and Intensive Outpatient Programs (IOP) existed in a somewhat ambiguous space within the behavioral health field. They were often seen as intermediate options for patients who required more than a weekly therapy session but didn’t necessarily need the round-the-clock care offered by residential treatment centers. This “middle ground” status meant that PHP and IOP treatment were often overlooked, overshadowed by the more familiar options of weekly therapy and full residential care.
However, this landscape has dramatically changed over the past few years. Providers of PHP and IOP treatment services are reporting an increase in both investor interest and healthcare referrals, signaling a shift in how these treatment models are viewed. According to Andy Cruz, co-founder and chief medical officer of Guidelight Health, the IOP and PHP space is now more critical than ever. As he discussed during a panel at the Behavioral Health Business conference INVEST 2024, these treatment programs have emerged as key players in solving some of the most pressing challenges in behavioral health today.
Historically, the PHP and IOP sectors were not as attractive to investors compared to residential treatment centers. Back in 2014, there were only three deals in the PHP/IOP outpatient sector, according to data from the Braff Group, compared to 24 deals involving residential treatment centers. This is largely because investors were more focused on low-acuity solutions like coaching, self-care tools, or basic therapy services, rather than intensive care options. Residential treatment was traditionally seen as the appropriate setting for addressing higher-acuity mental health issues.
However, the landscape began to change in recent years, especially during the COVID-19 pandemic. The pandemic served as a powerful “digital transformation engine” for healthcare, and behavioral health was no exception. As mental health services shifted to digital platforms, it became clear that patients with higher-acuity needs could receive effective care in less intensive settings. The realization that quality mental health care could be delivered remotely—and with reliable, positive outcomes—was a game-changer for the PHP and IOP treatment sectors.
This shift in how care is delivered has had significant ramifications for funding and investment. For example, Lightfully Behavioral Health, a company based in Thousand Oaks, California, raised a total of $80 million over the past three years from Regal Healthcare Solutions. The company provides both brick-and-mortar PHP facilities and virtual IOP services. Similarly, Bend Health, a pediatric mental health provider from Madison, Wisconsin, quietly built its fundraising efforts before securing $32 million in outside financing last year. And Guidelight Health disclosed a $16 million raise, partly due to investment from Google Ventures. These examples are reflective of broader trends, where more investors are showing interest in PHP and IOP treatment models as the sector matures and gains recognition.
This growing financial support is not only driven by investors but also by a noticeable increase in referrals from healthcare professionals. Psychiatrists, primary care physicians, and emergency room staff are increasingly directing patients to PHP and IOP services, recognizing the value these programs offer. In fact, Freiden from Lightfully Behavioral Health shared that psychiatrists are now among the highest referrers to these programs. Patients are more often entering PHPs and IOPs directly, rather than stepping down from more intensive care. This new approach has led to a better understanding of the role PHP and IOP treatment play in the broader mental health treatment landscape.
The appeal of PHP and IOP programs lies in their ability to offer flexible, tailored care to individuals at various levels of acuity. According to Dr. Monika Roots, president and chief medical officer of Bend Health, mental health is often a chronic condition that fluctuates between low and high acuity. Patients may not need full-time residential care but require more than the occasional therapy session. This is where PHP and IOP treatment shine, providing the necessary support while allowing patients to remain in their own environments.
The growth of PHP and IOP services is also raising important questions about their structure. Specifically, should providers specialize in one of these services, or should they offer both? Cruz, whose company Guidelight Health offers both PHP and IOP, explained that while both programs fall under the same umbrella, they serve distinct purposes. IOP is designed to provide additional support (about nine hours per week) that blends into a patient’s daily life. PHP, on the other hand, is more intensive, often requiring more time commitment and in-person care.
Despite their differences, the combination of PHP and IOP has proven to be effective in treating a wide range of behavioral health conditions. As providers navigate the complexities of offering these services, some are opting for a hybrid approach, offering both virtual and in-person care. For instance, companies like Bend Health operate entirely virtually, which allows them to address staffing shortages and offer more flexibility to patients. While virtual care is not ideal for every patient, particularly those requiring more hands-on attention, it has proven to be an essential component in today’s treatment landscape, especially for individuals in underserved or rural areas.
The increased attention on PHP and IOP treatment has had a profound impact on the behavioral health industry. These programs are becoming increasingly recognized as essential components of a comprehensive mental health care system. By offering an intermediate level of care that is flexible, accessible, and effective, PHP and IOP programs provide a critical option for individuals who might not need the full intensity of residential treatment but still require more than traditional outpatient therapy.
As the sector continues to evolve, it is likely that we will see more investments, more providers entering the space, and more patients seeking these types of services. The growing recognition of the role that PHP and IOP can play in behavioral health treatment signals a bright future for these programs. For both investors and providers, the challenge now is to continue adapting to meet the diverse and changing needs of patients while navigating the complexities of care delivery, whether through in-person or virtual services. With these programs at the forefront, behavioral health treatment is becoming more inclusive and accessible, offering patients the right care at the right time.
