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Mental health parity opens new business opportunities

A wax likeness of Austrian founder of the psychoanalysis Sigmund Freud sits in Berlin's Madame Tussaud's wax museum

Business may be looking up if you’re a psychiatrist, own a substance abuse clinic or run a residential treatment program for eating disorders. Thanks to changes in the law that have been in the works since 2008, the behavioral health sector will be on more equal footing with general medical care. That means millions more Americans will soon be able to seek treatment for mental health and substance abuse.

As the owner of the Renfrew Center, established in 1985, Sam Menaged could teach a class on ways to persuade insurers to cover patients. But even with all his savvy, Menaged still loses plenty of business.

“Renfrew turns away at least 40 percent of those patients who are referred to us because it’s prohibited under their policies,” he says.

But Menaged thinks the denial days may be ending.

“I’m already investigating other cities to open in, lower levels of care, but also residential care," he says.

If you are in the behavioral health business, 2014 is a defining moment. First, you’ve got the Affordable Care Act, which opens up service to all the uninsured. The law also requires most plans to include mental health and substance abuse services. The University of Maryland’s Howard Goldman says out-of-pocket spending – deductibles and co-pays – is on par with what a patient would spend on general medical care.

“It means that millions more people will be able to seek services in the private sector and have those services covered -- and covered in a way that will not cause them to be bankrupted,” he says.

More patients with better access to care have providers and investors humming. One in four Americans has a diagnosable mental disorder, including individuals with addiction. About 40 million people are expected to get improved access to mental health and substance abuse services by 2016.

With a market like that, it’s no wonder Wall Street has started sniffing around says Mark Covall, President of the National Association of Psychiatric Health Systems.

“There [are] huge investments in healthcare. And mental health has been on the sidelines. Today we are seeing investors look at this part of healthcare very differently,” he says.

Covall expects providers to plough new money back into their businesses and find ways to make services more affordable and attractive for insurers.

These new financial opportunities also represent behavioral health’s coming out party.

NYU Dean Sherry Glied says that makes "therapy" and "addiction" less like dirty words.

“We’ve deinstitutionalized in some sense stigma. We’ve taken it out of our insurance institutions. Whether we can take it out of our social institutions remains to be seen, but it’s definitely a big step forward,” she says.

Glied says finally, mental health is just another condition. And there’s room to make money off it, just like every other health condition.

About the author

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

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