Behavioral Health:
ABA Therapy

INDUSTRY SUMMARY

Understanding ABA Therapy

ABA Therapy is a mature scientific discipline that focuses on the analysis, design, implementation, and evaluation of social and other environmental modifications to produce meaningful changes in human behavior.

What Disorders are Treated?

  • Autism Spectrum Disorder (ASD)
  • Anxiety
  • Attention-Deficit/Hyperactivity Disorders (ADHD)
  • Borderline personality disorder
  • Developmental disorders
  • Obsessive-compulsion disorder
  • Post traumatic stress
  • Sleep deprivation
  • Substance abuse

Who are the Providers?

  • School-based providers:
    • Offered in the classroom alongside teachers, stand-alone centers, and outpatient facilities
    • Typically paid by school funding
  • Community-based providers:
    • Offered in a brick and mortar setting or in-home
    • Typically paid by commercial insurance companies or Medicaid

What are the Benefits?

  • Acquiring and practicing social skills
  • Decreasing problem behaviors
  • Developing memory and cognitive abilities
  • Improving language and communication skills
  • Improving attention and focus
  • Learning daily living skills
  • Managing feelings of aggression and anxiety
Client Plan
  • Assessment: Clients are assessed through a combination of interviews, observations and conversations with therapists, teachers and parents
  • Treatment: Implement unique techniques to help achieve the client's goals
  • Therapist Training: Provide training for parents, therapists and family members in order to maintain continued desirable client behaviors

ABA Market Overview

The ABA therapy market is expected to grow at a 4.5% CAGR over the next 3-5 years, however, the needs of the growing ASD population remain grossly underserved.

ASD Prevalence in Children

  • As of 2022, the CDC estimated that ASD prevalence increased to 1 in 44 children in the U.S.1
  • Improved monitoring of ASD has led to increased diagnosis among Americans and awareness of the economic burden it creates

Market Share by Revenue

  • Top 9 players posted $547 million in revenue in 2019, and are all for-profit organizations
  • The majority of providers generate $5 million or less in annual revenue
  • Most ABA Therapy businesses are one-to-two clinic operators founded by Board Certified Behavior Analysts (“BCBA”) and unfortunately lack the resources for rapid expansion

1 CDC prevalence report is released biennially, using the results from 4 years prior
Sources: Publicly available data


Current supply of clinicians is insufficient to meet growing demand for ABA therapy services as an estimated 100,000 BCBA are needed to serve the ~1 million children with ASD in the U.S., but only 30,000 are available.

ABA Market Growth

  • The ABA market is expected to grow to $2.45bn by 20251
  • In 2020, treatment programs generated $1.4 billion, while the medications market was worth approximately $600 million2
  • A shortage of child psychiatrists has resulted in over 50% of children in the U.S. with a mental health disorder not receiving treatment from a mental health professional

PE Deal Activity: Mental & Behavioral Health4

  • Available data shows an avalanche of deal volume in Q4 2020, with a record 22 deals to close out the year
  • This momentum continued into 2021, with at least 11 transactions made in each of the final three quarters
  • Like other healthcare services, the mental and behavioral segment is highly fragmented and lacks scale

1&2 Sources: Publicly available data
3 Deal count # in actuals

ABA Market Key Drivers

Due to better understanding and education around ABA therapies there has been increased diagnosis of behavioral health disorders among Americans and recognition of the economic burden it creates.

Increased incidence of ASD & diagnosis

Children with ASD have steadily increased over the past 2 decades from 1 in 150 in 2000, to 1 in 44 as of 2022

Mounting recognition of importance

Increased recognition of the benefits of early intervention and intensive therapy on children with ASD

Increased mandatory insurance requirements

All 50 states in the U.S. now require mandatory insurance coverage for ASD for state-sponsored plans, compared to 38 in 2014

Multiple growth avenues

Investors are able to better negotiate rates with payors, recruit additional providers, and build a strong brand presence

Highly fragmented industry

Top 9 players only account for 27% of revenue, while the remaining portion of the market is largely fragmented across smaller players

Stability relative to traditional healthcare

ABA market is relatively more stable with less stringent regulatory headwind

Sources: Publicly available data

ABA Beyond Autism Spectrum Disorder (“ASD”)

ABA and ASD have been synonymous for years now, but research highlights ABA’s applicability to several other behavioral issues outside of ASD alone.

ABA treatment is widely recognized as the most effective method for treating ASD, but its evidence-based treatment methods are applicable beyond ASD alone

All 50 states across the U.S. require insurance coverage for ABA as it relates to ASD. However, whether insurance will cover ABA therapy without an ASD diagnosis varies state to state

Mental health issues in schools and the provision of more providers will ultimately expand ABA recognition beyond ASD exclusively

The current macroeconomic uncertainty and labor shortage will delay the aforementioned expansion. 2022 began with 10 million job openings and 7 million unemployed

Other Disorders ABA Therapy Can Help Treat

Attention- Deficit/ Hyperactivity Disorder ABA therapy can help children with ADHD interact appropriately with others.

Obsessive Compulsive Disorder ABA therapy can help children with OCD cope with their disorder to prevent disruptions in daily life.

Oppositional Defiant Disorder ABA therapy can benefit children with ODD by conditioning them to act in healthier ways and discouraging them from the negative behavior characterizing the disorder.

Post-Traumatic Stress Disorder ABA therapy isn’t the only therapy needed to treat PTSD, but it is beneficial in reducing the negative reactions to the memories.

Panic Disorder ABA treatment for panic disorder will likely utilize behavioral activation, or BA. The idea is to teach the client that behavior can affect mood, giving them more control over their attacks.

Sources: Publicly available data

ABA Regulatory and Reimbursement Environment

Over the past two decades all 50 states have taken action to require meaningful coverage for treatment of ASD in state-regulated health plans. As it currently stands, ABA regulations focus almost exclusively on ASD.

ASD Reform Across the U.S.

All states require coverage for ABA, however, some states limit this coverage based on age, dollar or hour caps

Some state ASD insurance laws exempt or "carve out" one or more plan types from coverage requirements

Fully insured plans are subject to laws in the state where they are issued, not necessarily where the beneficiary resides

Mental Health Parity and Addiction Equity Act

2008
Prevents group health plans and health insurance issuers that provide mental health or substance use disorder (MH/SUD) benefits from imposing less favorable benefit limitations on those benefits than on medical/surgical benefits

Autism CARES Act
of 2019

September 2019
Under the Autism CARES Act of 2014, > $3.1bn was dedicated for ASD throughout various agencies; the CARES Act of 2019 authorizes an additional $1.8bn over the next five years

Consolidated Appropriations Act

December 2020
Requires that group health plans prepare a detailed, written comparative analysis for each of the plan’s nonquantitative treatment limitations (NQTLs)

Sources: Publicly available data

Top 4 Players

The industry is very fragmented with few larger players, creating opportunities to drive growth through M&A and de novo expansion.

Company Inception Funding/Backing Locations Employees Services/Treatment
1990 Acquired by Blackstone in 2018 24 States
(221 locations)
2,531
  • ABA/ASD services
  • Center-based services
  • Specialized outpatient services
  • Training programs
  • Remote clinical services
  • Card academy
2005 Acquired by Moran Capital Partners in 2015 12 States
(172 locations)
810
  • In-home treatment
  • Center-based services
  • School-based services
2017 KKR formed in 2017 17 States
(>160 locations)
575
  • Nationwide provider of individualized high-quality and innovative therapy
  • Center-based services
  • Home-based services
  • School-based services
  • Community-based services
  • Virtual therapy along with early intervention services
1988 Acquired by FFL Partners in 2017 20 States
(128 locations)
1,391
  • Center-based services
  • Home-based services
  • Diagnostics services
  • Speech, occupational and physical therapy
  • Telehealth services

Sources: Publicly available data

AMB Investment Banking Snapshot and Deal Team

AMB focuses on lower middle-market healthcare niches where consumerism and fragmentation meet to disrupt traditional healthcare channels. We typically advise companies with EBITDA of $5M to $20M and an average enterprise value of $100M, but will move up and down the spectrum. AMB’s research-oriented approach to business development has resulted in a vast network of strategic and financial sponsor relationships that yield industry leading intelligence and optimal outcomes for our clients.

Mikel Parker

Managing Director
843-501-2183 Direct
mikel.parker@ambadvisors.com

Ryan Loehr, CPA

Managing Director
843-405-1108 Direct
ryan.loehr@ambadvisors.com

Johnny Cross

Vice President
843-371-8596 Direct
johnny.cross@ambadvisors.com

Mike Nisbet

Associate
843-308-1198 Direct
mike.nisbet@ambadvisors.com

Kevin Williams

Analyst
843-473-7981 Direct
kevin.williams@ambadvisors.com

Max Kitchen

Analyst
843-405-1113 Direct
max.kitchen@ambadvisors.com

Sully Hagood

Analyst
843-576-4709 Direct
sully.hagood@ambadvisors.com