By early this year, Illinois had moved nearly half its Medicaid recipients into managed care in an attempt to improve care coordination. For WellSpring Resources, which operates behavioral health and substance-abuse treatment centers in Alton and Jerseyville, the shift served as a catalyst for change.
It had to grow if it was going to have enough negotiating clout to win acceptable contracts from the state's designated managed-care companies. “We realized that we were going to have a lot of challenges ahead of us to reach the dreams that we have,” said WellSpring's interim CEO, Jennifer Craig.
The company engaged an outside financial adviser and launched a strategic review process, which culminated in May with a merger agreement with Centerstone, which operates more than 120 facilities in Illinois, Indiana, Kentucky and Tennessee. The deal also included Centerstone's affiliation with Prairie Center, which provides substance-abuse treatment in central Illinois.
The three-way transaction was one of six behavioral health deals tracked in Modern Healthcare's second-quarter M&A Watch database. The quarter also included three additional deals for companies that offer products and services to behavioral health providers, including electronic health records and specialty pharmacy services.
There also were seven behavioral deals in the first quarter, as well as an additional transaction involving a company that offers revenue-cycle management services to behavioral health providers.
Private equity firms were the buyers in four of the deals in the first half of the year.
The heightened interest in behavioral health from investors comes shortly after new laws giving treatment for mental disorders payment parity with physical illnesses went into effect. Insurers and government payers also are beginning to see treatment of behavioral health disorders as a wise investment in their covered populations since these individuals tend to be high users of costly emergency rooms.