The Behavioral Health Innovation industry is at a crossroads, facing a host of complex challenges while simultaneously being presented with opportunities for growth and transformation. As the sector shifts toward integrated care and navigates economic pressures, the need for a balance between financial sustainability and the delivery of high-quality care has never been more urgent. Javier Favela, a seasoned professional with over 15 years of experience in the Behavioral Health Innovation and nonprofit healthcare space, offers a deep and nuanced understanding of the issues providers face today. From workforce shortages to technological advancements, Favela’s insights are a valuable guide for organizations striving to remain competitive and financially viable in an increasingly challenging environment.
Drawing from a Wealth of Experience
Javier Favela’s career has been deeply rooted in Behavioral Health Innovation and nonprofit healthcare, giving him a unique perspective on the challenges organizations encounter in this space. Throughout his career, he has held several senior leadership positions, including serving as the Chief Financial and Operating Officer for a large community mental health organization. It was here that he first witnessed the significant shift toward a more holistic, whole-person approach to care, and it became a cornerstone of his professional outlook.
In addition to his leadership role, Favela also served on the boards of various peer-support-run organizations, including the March of Dimes and Children Provider Networks. His extensive experience in both operational management and strategic decision-making allows him to offer a comprehensive view of how organizations in the Behavioral Health Innovation sector can navigate financial, operational, and clinical challenges.
“I channel that experience through the technology lens, offering a unique perspective in my role today,” Favela explains. His current work, particularly with behavioral health organizations and Federally Qualified Health Centers (FQHCs), allows him to guide organizations on the importance of integrating technology to address operational inefficiencies while maintaining financial sustainability.
Key Financial Challenges in Behavioral Health
One of the central themes that Favela highlights in his discussions on the Behavioral Health Innovation sector is the critical financial challenges organizations face. According to recent surveys of behavioral health executives, workforce issues are top of mind, and the impact on the bottom line is substantial.
“The workforce issue, especially post-COVID, remains at the forefront of challenges in the Behavioral Health Innovation industry,” Favela says. High turnover rates and absenteeism continue to cause financial strain, and organizations are struggling to maintain a stable, well-trained staff. During his time as CFO, Favela noted that each instance of staff turnover in behavioral health programs could cost between $10,000 and $15,000—figures that are even more concerning given the current rates of staff turnover, which often exceed 20%.
These workforce challenges, along with the transition to managed care and Medicaid, create a perfect storm of financial pressures for Behavioral Health Innovation organizations. “The shift to managed care and Medicaid in the nonprofit space has tightened payer rates, and many organizations are struggling to adjust,” Favela points out. Additionally, while many organizations have used emergency funds to implement short-term pay raises to retain staff, these measures have not been enough to address the underlying issues. Without long-term rate increases or a move toward prospective payment models, these financial challenges will continue to persist.
Another significant hurdle is competition from larger, for-profit entities. “Competing with for-profit organizations that have larger budgets and more capital infusion has become more intense,” Favela observes. Behavioral health organizations, particularly those in the FQHC space, are now up against industry giants like Walgreens and CVS, which are expanding their reach into behavioral health services. Moreover, mergers and acquisitions in the commercial Behavioral Health Innovation sector have led to a lack of interoperability and significant challenges with disparate technology systems. This has resulted in poor revenue cycle management and millions of dollars left uncollected, further exacerbating the financial strain on nonprofit organizations.
Navigating the Economic Impact
The economic climate of recent years has left an indelible mark on the Behavioral Health Innovation industry. The pandemic triggered emergency funding that helped many organizations weather the immediate impact of COVID-19, but now, as we move into 2024, the long-term financial effects of these short-term solutions are becoming evident.
Favela points to a shift occurring in the nonprofit space: a movement toward more sustainable revenue models. Innovators within the sector are transitioning to become Certified Community Behavioral Health Clinics (CCBHCs), a model that allows organizations to access prospective payment systems and provide care beyond the limitations of the traditional fee-for-service model. This shift is particularly beneficial for organizations that are expanding their behavioral health services to include physical health care or aiming for dual certification as both CCBHCs and FQHCs.
“Organizations that are becoming dual-certified are seeing the flexibility they need to provide integrated care and improve their financial standing,” Favela explains. This dual certification opens up new pathways for financial sustainability, offering increased flexibility in how services are billed and funded.
Another trend Favela observes is the growing number of mergers and acquisitions in the nonprofit space, a move that allows organizations to consolidate resources and scale their operations. “Large, innovative organizations are merging to create economies of scale,” he says. By streamlining technology across the continuum of care and engaging with clinically integrated networks or accountable care organizations, these larger entities can reduce costs, enhance care, and gain better negotiating power with payers. This “go big or go home” mentality is shaping the future of Behavioral Health Innovation care, particularly for organizations willing to take on risk and embrace a forward-thinking approach to financial sustainability.
Balancing Cost Control with Innovation
In an era where financial pressures are intensifying, Behavioral Health Innovation organizations are tasked with balancing the need for cost control with the imperative to invest in innovation. Favela emphasizes that improving clinical workflows is a critical part of this equation. By enhancing operational efficiencies, organizations can reduce costs while simultaneously improving the quality of care.
“Executives are focusing on improving clinical workflows to enhance provider efficiency and reduce burnout,” Favela explains. “The goal is to make providers and clinicians more efficient, so they can see more patients without compromising the quality of care.” This focus on efficiency is essential in addressing two of the most significant challenges in the industry—high turnover rates and clinician burnout.
Another key strategy involves diversifying revenue streams. Nonprofit organizations, in particular, are finding success by expanding into the commercial payer space. Many nonprofits rely heavily on Medicaid, with commercial payers accounting for less than 5% of their revenue. However, by diversifying into the commercial payer market, these organizations can tap into new revenue sources, especially as insurers are increasingly incentivizing home-based and virtual care, which is needed in underserved and rural areas.
NextGen’s Adaptation for Financial Viability
For technology companies like NextGen, adapting service delivery models to meet the needs of the Behavioral Health Innovation sector is critical to ensuring financial viability while improving care outcomes. Favela, who works with NextGen, highlights the company’s commitment to improving clinical workflow and the provider experience, particularly for FQHCs and behavioral health organizations.
NextGen’s focus on integrating artificial intelligence (AI) and augmented technology has proven to be a game-changer in reducing clinician burnout. The company’s ambient assist technology allows providers to complete more than 95% of clinical documentation with AI, freeing up valuable time for clinicians to focus on patient care. “This technology not only boosts efficiency but also improves the provider experience, making it easier for them to see more patients and reduce burnout,” Favela notes.
Additionally, NextGen is focusing on improving patient engagement, which has become increasingly important in a post-COVID world. Virtual visits, integrated patient engagement, and population health tools are helping providers manage high-risk patients in value-based contracts. By aligning data management, care coordination, and patient engagement strategies, NextGen is supporting financial sustainability for organizations transitioning to value-based care models.
Diversifying Revenue and Reducing Dependency on Traditional Funding
To stay competitive and financially viable, many organizations in the Behavioral Health Innovation sector must reduce their dependency on traditional funding models and explore new revenue sources. “Too many mid-sized organizations have not taken full advantage of funding opportunities to become integrated care providers,” Favela says. “The whole-person approach to care is something payers are increasingly looking for, and those organizations that can deliver that will have a competitive edge.”
Organizations that expand into integrated care models or adopt alternative payment models, such as prospective payment systems, will be better positioned for financial sustainability. For-profit organizations, in particular, are encouraged to expand into the Medicaid space and adopt sub-capitated models or performance-based contracts that incentivize quality metrics.
Looking Ahead: The Future of Behavioral Health in 2024
Looking toward 2024, Favela believes the Behavioral Health Innovation space will be defined by one thing: technology. “In 2024, we’ll see technology and data innovation at the forefront of Behavioral Health Innovation,” he predicts. “Artificial intelligence, augmented technology, and data analytics will be critical in helping organizations improve efficiency, reduce costs, and deliver better care.”
As the industry embraces technological solutions and innovative care models, it will also need to focus on long-term financial sustainability. By diversifying revenue streams, adopting integrated care models, and investing in technology, organizations can not only survive but thrive in the face of evolving challenges.
For Behavioral Health Innovation providers, the future is clear: adapt, innovate, and embrace the power of technology to ensure both financial viability and high-quality care for all patients.
