What's the Connection between ASD Prevalence, Insurance Mandate, and PE Activity -- and Ultimately, Client Outcomes?

In the business of Private Equity, money flows where money is. And nowhere is this more evident than in the field of (applied) behavior analysis. In August 2019, Tennessee became the 50th and FINAL state to pass the Autism Insurance Mandate. In simple terms, as more and more states have mandated insurance coverage for Applied Behavior Analysis (ABA) intervention for people with autism, the money pot has gotten bigger and bigger and bigger...

The Autism industry has been transformed from a highly fragmented cottage industry, with thousands of small companies offering ABA services, to one in which MEGA ABA companies are newly emerging -- at a very rapid pace. Most of these MEGA agencies are being formed by acquiring an existing agency and using that as a platform to acquire and consolidate smaller agencies as a means to rapidly scale. There are 2 exceptions to that playbook - Kadiant, backed by TPG Capital, which has reportedly committed $300 million to this venture, and Blue Sprig Pediatrics, backed by KKR's Private Equity investing arm - are both platforms that were "created."

Why should we care? After all, all this money flowing into the field is good, right? With a few BILLION dollars that have already exchanged hands from buyers and sellers and investors in our space, some of that money must surely have been used to help clients, right? Money used to provide greater access to care through expanding geographic footprint, improved quality of care through interdisciplinary approaches and standards, and ultimately, better health outcomes through greater investments in hiring and training BCBAs, who supervise cases, and RBTs, and Behavior Technicians who implement ABA programs, right?

Well, according to parents and clinicians who have been personally directly affected by the PE-led M&A activity, the "promise of Private Equity" is not yet being realized. I suppose this shouldn't come as any surprise to anyone. When the primary goal of an organization shifts from better health outcomes to higher financial outcomes, the roadmap begins to shift dramatically as companies make business decisions to achieve their goals.

What will be the long-term effects of the Private Equity intervention in the ABA industry? I suppose that depends on whether the primary goal of PE-backed companies puts profits ahead of client outcomes. One thing for sure, PE firms play to win and they are very, very good at winning.

By no means am I suggesting that you can't have both -- better client outcomes and higher profits -- what I'm questioning is what metrics are used to determine successful outcomes? Those that lead to greater profits or those that lead to helping clients achieve independence?