The Behavioral Health Workforce Debate has become one of the most significant issues shaping the future of mental health care in the United States. As demand for behavioral health services has soared—exacerbated by the ongoing mental health crisis—companies are under immense pressure to expand access quickly while maintaining quality of care. Venture capital and private equity have fueled this urgency, with last year’s investments in behavioral health, particularly digital mental health, reaching approximately $5 billion.
In this fast-moving environment, behavioral health companies are experimenting with different workforce models, primarily debating whether clinicians should be hired as W-2 employees or engaged as 1099 contractors. This debate not only affects clinicians and companies but ultimately impacts patient access, treatment outcomes, and the long-term sustainability of behavioral health services.
Cerebral’s Workforce Model Sparks the Behavioral Health Workforce Debate
At the center of this debate is Cerebral, a virtual mental health and medication provider founded in 2019 by Kyle Robertson and Ho Ahn. The company grew rapidly and raised a $300 million Series C round that valued it at $4.8 billion. Cerebral now operates in all 50 states with approximately 2,300 clinicians and aims to scale that number to 10,000.
Cerebral recently made headlines by changing its W-2 clinicians from salaried employees to hourly-paid contractors. This reclassification led to many clinicians losing guaranteed health benefits unless they met specific weekly hour thresholds. The timing of this shift—just weeks after their massive funding round—sparked widespread criticism and brought intense scrutiny to workforce classification practices in behavioral health.
This move by Cerebral ignited the broader Behavioral Health Workforce Debate around how companies structure their clinician workforce to balance flexibility, cost, and care quality.
The Core of the Behavioral Health Workforce Debate: Employees vs. Contractors
The Behavioral Health Workforce Debate centers on the advantages and disadvantages of employing clinicians as W-2 staff versus engaging them as 1099 contractors.
Proponents of the W-2 model argue that full employment with benefits fosters clinician loyalty, professional growth, and consistent quality of care. W-2 employees typically receive benefits such as health insurance, paid time off, and other protections mandated by federal and state laws. These factors can lead to higher job satisfaction and better patient outcomes.
In contrast, the contractor model allows companies to quickly scale their workforce to meet fluctuating demand, especially important given the national shortage of behavioral health clinicians. Contractors can set their own hours and often work for multiple companies, offering flexibility that appeals to many clinicians. From a business perspective, contractors reduce labor costs related to benefits and administrative overhead, which can be crucial for startups under pressure to grow rapidly and manage margins.
Cerebral’s Chief Medical Officer, David Mou, argues that this traditional view tying employment status to care quality is outdated. He emphasizes the need to focus on measurable clinical outcomes instead of employment classification when evaluating care quality.
Measuring Quality Outcomes: A New Perspective in the Behavioral Health Workforce Debate
Cerebral employs a data-driven platform that gives clinicians, whether employees or contractors, access to performance metrics and population-level data. This approach allows the company to monitor care quality objectively.
According to Cerebral, 82% of patients experience meaningful reductions in anxiety, and depression scores decrease by an average of five points on the PHQ-9 scale. The company also maintains a 100% compliance rate with required lab monitoring for patients on medications.
This focus on clinical outcomes rather than employment status challenges the Behavioral Health Workforce Debate’s traditional assumptions and suggests that quality care can be delivered through multiple workforce models if supported by the right technology and management practices.
Alternative Workforce Models: Fully Employed Clinicians and Their Advantages
While Cerebral adopts a hybrid approach, some companies have committed fully to the W-2 employee model. Lifestance Health Group, for example, employs nearly all its clinicians and operates a hybrid care delivery system combining telehealth and in-person clinics across 31 states.
Lifestance offers its clinicians competitive benefits, sign-on bonuses, and equity awards—$15,000 annually for therapists and $75,000 for psychiatrists—highlighting the value it places on workforce stability. The company argues that having an engaged, full-time workforce is a competitive advantage, especially during the national clinician shortage.
Similarly, Resilience Lab, founded in 2019, employs nearly all of its therapists and prioritizes creating a supportive work environment. Its CEO, Marc Goldberg, points out the ethical and regulatory risks of relying heavily on contractors, underscoring the importance of investing in a stable, well-supported workforce to ensure high-quality care.
The Psychiatrist Shortage: A Key Factor in the Behavioral Health Workforce Debate
One of the thorniest issues in behavioral health care is the shortage of psychiatrists—the most highly trained and sought-after providers. Talkiatry Management Services, a telepsychiatry company founded in 2019, employs all its psychiatrists as W-2 employees.
CEO Robert Krayn stresses that high-quality mental health care depends on physician leadership and strong payer relationships. Many startups focus on lower-level care (e.g., therapy) with contractors because psychiatrists are harder to recruit and more costly. However, Krayn argues that this trend risks sacrificing quality and payer reimbursement.
His company emphasizes in-network psychiatry services, countering app-based models that rely heavily on out-of-network or cash-pay arrangements.
Regulatory and Legal Challenges Fuel the Behavioral Health Workforce Debate
The Behavioral Health Workforce Debate is also shaped by evolving laws and regulatory scrutiny of contractor classifications. The gig economy faces mounting challenges nationwide, from lawsuits to ballot initiatives, questioning the legality of classifying workers as independent contractors.
Legal experts warn that behavioral health companies could face significant penalties if they misclassify clinicians. The experience of HomeHero, a home care startup that switched from contractors to W-2 employees due to regulatory pressure—ultimately leading to closure—is a cautionary tale.
Employers must remain vigilant to comply with changing state and federal regulations, making workforce classification decisions a high-stakes issue in behavioral health.
Investor Pressures and the Behavioral Health Workforce Debate
Investor preferences further complicate workforce strategies. Venture capitalists and private equity firms typically prioritize software scalability and gross margins, often viewing employees as costly expenses. This preference incentivizes startups to favor contractor models that reduce labor costs.
Marc Goldberg, an experienced investor and CEO of Resilience Lab, notes that many investors “hate employees” because of the associated costs and compliance burdens. This financial pressure fuels tension within the Behavioral Health Workforce Debate, where quality care and workforce stability may compete with investor demands for rapid growth and profitability.
Headspace Health’s Shift Toward Employees: Another Perspective
Headspace Health, formed from the merger of Headspace and Ginger.io, employs 93% of its clinicians as W-2 employees, while contracting out psychiatrists to reduce costs. The company initially relied more on contract therapists but shifted to employees to improve availability and ensure adherence to care protocols.
Wayne Li, VP of Care Operations, highlights that contracted clinicians often work for multiple companies, which can dilute their engagement. Employing clinicians full-time supports cultural alignment and retention, reinforcing care consistency—a vital consideration in the Behavioral Health Workforce Debate.
The Path Forward: Prioritizing Outcomes in the Behavioral Health Workforce Debate
The Behavioral Health Workforce Debate is not simply about employee versus contractor status. It encompasses the challenge of expanding access to behavioral health services while maintaining or improving clinical quality, managing regulatory risk, and satisfying investor expectations.
Companies like Cerebral are experimenting with hybrid workforce models supported by robust data systems to ensure quality care. Others, such as Lifestance and Resilience Lab, emphasize stable, employee-based workforces.
Ultimately, the industry’s success hinges on placing clinical outcomes and patient safety at the center of all workforce decisions. As David Mou says, “At the end of the day, there are all these metrics — clinical outcomes and clinical safety, to me, should be the No. 1 thing. That should be the story.”
As the Behavioral Health Workforce Debate continues, its resolution will shape the future of mental health care access and quality in the United States.
