Summary Perspectives on the 2024 Autism Investor Summit

We attended the 2024 Autism Investor Summit (AIS) in Beverly Hills last week and would like to share our observations and perspectives. We were blessed with incredible weather, a great venue, and a wide array of providers, investors, and solutions vendors, and as always are appreciative of AIS and its organizers for putting on such a great event. We had an opportunity to meet with provider groups large and small – see below for our summary observations based on our conversations. 

Please reach out if you have questions or would like to learn more about our capital raising and M&A services and experience working with providers of ABA, ASD treatment, pediatric therapy, and private duty nursing.

SUMMARY PERSPECTIVES

1. Attendance was strong, and participants were optimistic about M&A activity, both on the buyside and sell-side

The conference drew a stellar crowd – large operators, emerging and innovative start-ups and the entire spectrum in between. Discussions centered on the state of the market and the timeline for returning to normal – in terms of transaction volumes and valuations.  

Despite some recent high-profile operational and financial missteps from some larger groups, the overall sentiment among providers and investors was bullish optimism. Operators expressed a strong appetite for strategic transactions, fueled by a confluence of factors: improving company performance and staffing/labor dynamics, stabilizing reimbursement structures, a more predictable regulatory environment, and a growing pool of capital-seeking deployment from investors and lenders. This confluence positions the ABA / ASD treatment sector for a period of heightened activity and higher valuations in the coming months and quarters.

2. Growth, growth, and more growth among operators of all shapes and sizes

We had the opportunity to speak with operators with different approaches to care delivery:  in-home, center-based, school-based, some telehealth-delivered supervision and training, and hybrids of all of the aforementioned. All operators spoke to their historical and current growth trends, and optimism for future growth.  

For example, the in-home model is flourishing in many states. A prevalent strategy highlighted involves entering a new market with in-home services to build a referral network and establish a client base, and adding a center or centers once the volumes are supportive. Strategically, centers expand care opportunities for existing patients by offering the clinical benefits of more ABA intervention and support as well as related services offerings in some cases.   Also, managing services at centers can provide more efficient utilization of patient-facing staff as well as better opportunities for ongoing clinical and service training.  

School-based therapy remains a thriving segment, with continued demand for specialized providers to support school systems. This model offers an attractive business proposition due to the captive referral source within the school system and the growing need for these services – and most school districts are ill-equipped to meet surging demand.  From an operational standpoint, school-based services share positive attributes of both in-home and center-based care.  Working hours typically align with the school day, which can be advantageous for recruiting staff, particularly for working mothers.  Additionally, state mandates are increasing pressure on school districts to accommodate the growing number of students diagnosed with ASD and who have social and emotional learning issues, further fueling demand for specialized providers.

Notably, there’s a divergence in the approach to speech and occupational therapy (ST/OT) services. Some operators specialize in core ABA and ASD treatment and outsource ST/OT, differentiating their capabilities on the quality of clinical staff and care delivery. Others integrate ST/OT for a comprehensive, one-stop care model. The latter approach resonates with certain families for its convenience and potential for more coordinated care. Payers also recognize the value of a well-executed ‘single-provider’ model, as it creates the opportunity for better care access, care coordination and improved outcomes.  However, in offering and adding related services such as ST and OT, operators have to be resourced for additional recruiting, staffing and management requirements, as well as scheduling and compensation that differ from their core ABA operations.

3. Reimbursement rates and authorized hours/services can vary materially across states and payers

Reimbursement for ABA therapy and ADS treatment remains a complex landscape for operators. While State Medicaid/MCO and commercial insurance plans are widely utilized, both reimbursement rates and authorized hours/services are not uniform across states/markets, creating gaps in access to care and challenges for operators. Interestingly, despite these disparities in reimbursement, staff wages appear to be less variable. Notably, California, despite boasting generous benefits programs via its Regional Centers, offers some of the lowest hourly reimbursement rates in the nation. This highlights the challenge operators face in navigating the interplay between reimbursement and staffing costs across various state markets.

4. Reimbursement and regulatory outlook is stable-to-positive

Attendees highlighted recent rate improvements in select states and painted an optimistic picture of the reimbursement and regulatory landscape nationally. Discussions also focused on the growing emphasis on value-based care and outcome-driven compensation for providers and the related execution challenges involved. Capturing meaningful “outcomes” requires substantial investments in scale across payer and provider stakeholders: data collection, technology, automation, and industry-wide scaling – elements largely absent in the current environment. In our view, a widespread shift to value-based payments is likely several years away. 

There was also appreciation among participants for the sector and its “early innings” status – robust coverage for ABA therapy and related services was only relatively recently established among many State Medicaid programs and commercial payers.  Significant access issues continue to persist, highlighting that demand far outstrips current service delivery capacity. Most providers are sub-scale, lacking the infrastructure to capture the necessary outcome data.  Larger groups, while positioned to handle increased caseloads, wouldn’t have the immediate capacity to absorb substantially all the care needed in a value-based system. And an immediate shift to value-based care would create critical gaps in service provision, ultimately harming patients and their families.

CONCLUSION

Based on our conversations at the conference and long-time and ongoing coverage of the sector, our team remains highly optimistic about the M&A and financing markets. We expect overall activity to pick up in the second half of 2024, and next year has the potential to be a banner year in the sector given the pent-up transaction volume that is temporarily depressed due to the factors noted above.  

Our team actively tracks private equity investments and strategic transactions in ABA therapy, ASD treatment services, pediatric therapy, private duty nursing, and related areas. Please reach out if we can help you evaluate strategic transactions in this sector.

Connect with us at The CASP 2024 Annual Conference

Bailey & Company is excited to attend The Council of Autism Service Providers (CASP) Annual Conference on April 27-30, 2024. Our firm is pleased and honored to support CASP as a Business Affiliate again this year. We will be leading a break-out session on M&A and financing trends on Monday April 29^th, and meeting with operators to discuss deal dynamics and the market for strategic transactions. 

Please contact our team if you plan to be at CASP and would like to meet with us.

CONTACT INFORMATION

Russell Bryan

Managing Director

Phillip Knotts

Managing Director

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ABOUT BAILEY & COMPANY

Bailey is a Nashville-based merchant banking platform focused on growth and late-stage healthcare and technology companies. Through the firm’s M&A advisory and strategic fund businesses, Bailey supports strong management teams that have built scalable platforms by providing strategic insights, world class advice, and access to one of the most diverse networks of industry experts. Since our founding, our senior bankers have closed over 200 transactions representing more than $17B in value. For more information see: www.bnco.com.