Lifestance Health Group Inc. (Nasdaq: LFST), a prominent outpatient mental health provider based in Scottsdale, Arizona, continues to focus on its core business model—delivering in-network mental health care through hybrid mental health services that combine both in-office and telehealth visits. In a recent panel discussion at the Goldman Sachs 43rd Annual Global Healthcare Conference, CEO Michael Lester made it clear that Lifestance has no plans to deviate from or expand beyond its current hybrid mental health services offerings.
“We’re not concerned about all the volatility and the nonsense that’s going on in the market these days; we’re just heads down, continuing to operate,” Lester said. “We’re not looking for a new revenue line; We’re not looking for a new service line. We just need to keep doing exactly what we’re doing because of the supply-demand issue and the patient volume that’s out there.”
This unwavering commitment comes as the mental health industry faces significant disruption and uncertainty, with many competitors exploring new service lines or alternative revenue streams. Lifestance, however, remains focused on strengthening its foundation by expanding clinician capacity and improving patient access through its hybrid mental health services model.
Addressing the Fragmented Mental Health Market Through Aggressive Clinician Hiring
One of Lifestance’s primary growth strategies is to aggressively expand its clinician workforce. Chief Operating Officer Danish Qureshi emphasized the vast potential for growth during the panel, highlighting that while there are approximately 650,000 mental health clinicians nationwide, Lifestance currently employs around 5,000 of them.
“That leaves a lot of white space in conversations with clinicians who are not yet part of Lifestance,” Qureshi said.
This significant opportunity to onboard new clinicians allows Lifestance to consolidate what has historically been a fragmented outpatient behavioral health market made up of many small independent providers and groups. By integrating these clinicians into its in-network system, Lifestance can offer greater accessibility and continuity of care through its hybrid mental health services.
Integrated Care Partnerships and Strong Payer Relationships Bolster Growth
Lifestance has also invested in integrated care partnership programs designed to bring behavioral health services into closer coordination with physical primary care. CEO Lester detailed that the company currently operates 10 such integrated programs, reflecting a growing trend among commercial payers.
“Some commercial payers believe fully integrated mental health care into primary care will lower their overall medical care cost,” Lester explained.
These partnerships align with Lifestance’s broader vision of affordable, accessible mental health care that is tightly connected to patients’ overall health management. The company maintains strong relationships with payers, which helps ensure stability and reimbursement consistency for its hybrid mental health services.
Rate Parity Between Telehealth and In-Person Visits Is Key to Hybrid Model Success
A unique and essential aspect of Lifestance’s hybrid mental health services model is the negotiated rate parity between telehealth and in-office services with payers. This parity enables the company to offer flexible care options without compromising financial sustainability.
“It’s the right thing to do from a patient care standpoint,” Lester said, emphasizing that rate parity has been a foundational principle since Lifestance’s launch in 2017.
By ensuring telehealth services are reimbursed on par with in-person visits, Lifestance can maintain a hybrid mental health services approach that responds to patient preferences while addressing clinician supply challenges.
Telehealth Utilization Peaked but Is Trending Toward a Balanced Model
Telehealth adoption in behavioral health surged during the COVID-19 pandemic, and Lifestance experienced this firsthand. Currently, approximately 79% of the company’s visits are conducted via telehealth. However, Lester notes that telehealth usage is declining by about one percentage point each month.
He projects that telehealth will eventually stabilize at around 50% of total visits, supported by patient preference data. For instance, a Blue Cross Blue Shield of Massachusetts Foundation survey found that 78% of respondents received behavioral health services in person during the last year. Meanwhile, Rock Health’s data indicates that 75% of patients prefer in-person mental health care, with a strong majority favoring office visits over other modalities.
These trends underscore the importance of maintaining a flexible hybrid mental health services model that can accommodate varying patient preferences over time.
Protected From Payer Reimbursement Cuts Thanks to Market Demand and Contract Terms
Lifestance is currently insulated from potential payer-driven reimbursement cuts linked to telehealth utilization. This protection comes from two main factors: the rate parity baked into contracts and the intense demand from large employer clients for robust mental health provider networks.
“Payers have their customers — the Microsofts, Coca-Colas, and Delta Airlines of the world — screaming at them daily over provider network adequacy,” Lester said.
This market pressure discourages payers from reducing reimbursement rates for mental health clinicians, as doing so could further limit access and provoke backlash from major corporate clients who seek comprehensive employee mental health benefits.
Slower Office Expansion and Focus on Organic Growth for Improved Profitability
After a period of rapid office openings and acquisitions, Lifestance is shifting to a more measured approach. The company plans to slow the pace of new office openings through 2023 to better align physical footprint growth with evolving telehealth utilization and to improve overall profitability.
In line with this, Lifestance will reduce its merger and acquisition spending to between $50 million and $70 million in 2022, down from $105 million in 2021. The emphasis will now be on organic growth, primarily through hiring new clinicians rather than acquiring existing practices.
This strategic pivot reflects a maturing phase for Lifestance, which initially expanded aggressively with the help of private equity partners Summit Partners, Silversmith Capital Partners, and later TPG Capital. CEO Lester acknowledged that early acquisitions effectively created barriers for new entrants by consolidating most large groups in the outpatient mental health space.
“We acquired almost everything of any size out there in stealth mode the first three years,” Lester explained. “There are still many small groups, but very few large groups today.”
Looking Ahead: Maintaining Focus on Access, Quality, and Hybrid Care
Lifestance Health Group remains focused on its original mission: expanding access to affordable, high-quality in-network mental health care through hybrid mental health services that blend telehealth and in-office visits. By investing heavily in clinician recruitment, nurturing integrated care partnerships, and sustaining strong payer relationships with rate parity agreements, Lifestance is positioning itself to meet growing patient demand while navigating an increasingly complex behavioral health landscape.
As the market continues to evolve post-pandemic, Lifestance’s deliberate and steady approach may prove advantageous in delivering consistent care without the distractions of chasing new service lines or untested revenue streams. The company’s leadership remains confident that focusing on what they do best is the right strategy to build long-term value for patients, clinicians, payers, and investors alike.
