For years, behavioral health providers have been grappling with one of the most persistent challenges in healthcare: staffing shortages. The COVID-19 pandemic only intensified this struggle, creating a workforce crisis that many organizations have been trying to manage ever since. However, a new report reveals that the top challenge facing behavioral health operators is shifting — behavioral health reimbursement challenges 2024 are now projected to overshadow staffing concerns.
This insight comes from the latest Behavioral Health Business Survey, which gathered responses from 404 professionals working in organizations that provide treatment for behavioral health, mental health, and substance use disorders. The survey paints a nuanced picture of the evolving landscape in behavioral health care, showing that while staffing remains a significant obstacle, behavioral health reimbursement challenges 2024 are fast becoming the industry’s most critical concern.
The Staffing Shortage: Still a Challenge, But No Longer Number One
Since the start of the pandemic, the behavioral health sector has faced intense staffing challenges. From recruitment difficulties to high turnover rates, providers have struggled to maintain adequate numbers of qualified clinicians and support staff. This shortage has directly impacted service capacity and the quality of care available to patients.
In last year’s survey, a majority (53%) of behavioral health providers identified staffing as the biggest challenge they faced, compared to 34% who pointed to reimbursement. Fast forward to 2024, and the numbers have shifted: only 42% of respondents now say staffing is their top challenge, while 43% report behavioral health reimbursement challenges 2024 as the primary concern.
This shift reflects a growing recognition that financial pressures are increasingly constraining providers’ ability to deliver care effectively, while staffing woes—although still serious—are no longer the single largest hurdle.
The Link Between Staffing and Reimbursement
It’s important to understand that staffing and reimbursement issues do not exist in isolation. In fact, many industry leaders emphasize how closely these challenges are intertwined. Trey Laird, founder and CEO of The Lighthouse, a Connecticut-based substance use disorder (SUD) provider, explains the dynamic bluntly:
“The biggest issue facing [substance use disorder] providers is the continued clash with payers, with the latter ‘winning’ the battle at this point. This causes lower or flat reimbursement rates, which means that most centers can’t retain staff. This means there is constant turnover at SUD providers and quality of care suffers. You have talented therapists or clinicians across the country who leave facilities and open private practices as quickly as possible.”
When reimbursement rates stagnate or decline, providers lack the financial flexibility to offer competitive salaries or invest in staff development, leading to burnout, turnover, and an exodus of top talent. The consequence is a vicious cycle that threatens both workforce stability and the quality of patient care.
The Financial Strain of Reimbursement Cuts
Digging deeper into the financial realities, more than half of behavioral health professionals surveyed expect payer rate cuts or only minimal rate increases in 2024. These reimbursement trends will place the greatest financial strain on providers, even more so than staffing expenses, which 27% of respondents identified as the biggest financial burden.
This trend reflects broader economic and policy pressures. Payers—including insurance companies and government programs—are under increasing scrutiny to manage healthcare costs, particularly in behavioral health, which has historically experienced rapid growth in utilization and spending.
Brian Wheelan, CEO of Transformations Care Network, a provider of outpatient mental health services ranging from psychiatry to ketamine therapy, highlights the context:
“Today, most payers are under significant cost of care pressure, in general, and specifically in mental health. They are worried about the economy and employment. Health care inflation, especially in acute settings, is extreme. They are looking for dollars and they need to reign in bad practices in their new, far-flung networks.”
This cost containment mindset means payers are increasingly pushing for accountability and demonstrable outcomes from providers, which can be difficult to achieve in the complex, nuanced field of behavioral health.
Value-Based Care: Hype Versus Reality
Amidst these reimbursement challenges, value-based care has been touted as a promising alternative to the traditional fee-for-service model. In theory, value-based care links payments to patient outcomes rather than volume of services, encouraging providers to focus on delivering high-quality, efficient care.
Despite this promise, adoption within behavioral health remains limited. According to the survey, over 37% of providers reported that their organizations do not use any form of value-based contracts. Only 7% said that value-based contracts make up more than half of their revenue.
Jon Gordon, a general partner at HC9 Ventures—an investment firm specializing in early-stage behavioral health companies—offers perspective on why the transition is slow:
“The key is can you build a business with a sustainable reimbursement model because we’re still in a fee-for-service world. Behavioral health is still too squishy to move to value-based care in a big way. But then again, physical health is really not value-based either. So let’s not beat ourselves up too much.”
Behavioral health outcomes can be challenging to quantify consistently due to the complexity of mental health and substance use disorders, the diversity of patient experiences, and the long-term nature of recovery. As a result, many providers remain cautious about fully embracing value-based reimbursement, preferring to operate under fee-for-service models they understand and can predict financially.
Preparing for the Road Ahead
As the behavioral health industry moves into 2024, providers face a delicate balancing act. They must adapt to tightening reimbursement environments while continuing to address workforce challenges and deliver high-quality care to a population with growing needs.
Providers who can innovate by improving operational efficiency, investing in outcome measurement tools, and gradually integrating value-based care components may have a competitive advantage. Equally, advocating for fair reimbursement rates that reflect the complexity and importance of behavioral health services will be critical.
The industry’s trajectory suggests that behavioral health reimbursement challenges 2024 will shape behavioral health providers’ strategic decisions in the coming year. Addressing this financial pressure head-on is essential for building sustainable care models that attract and retain skilled clinicians, ensure access to treatment, and ultimately improve patient outcomes.
