In the face of a national emergency in child and adolescent mental health, urgent measures are needed to help those in need. Many struggling youths and teens do not receive age-appropriate, timely, and affordable mental health care today.
Training more mental health professionals is part of the solution, but that takes time. Digital health approaches can be developed more quickly, though they have not received the same kind of attention from investors as options for adult mental health, which have seen enormous investment over the past few years.
The current annual spending on youth mental health in the United States is $3 billion, covering 5 million patients per year, according to an analysis conducted by Menlo Ventures, the company we work for.
The status quo for youth mental health remains a combination of individual, face-to-face psychotherapy (talk therapy) and prescription medications like antidepressants and anti-anxiety agents. Mental health care for youths suffers from a lack of coordination between child-serving systems and cost concerns, with major youth-specific issues that include access to care, complex stakeholder relationships, and government regulations and funding.
Barriers to access. One major barrier to access to care is the lack of providers. Children are not small adults, and only a fraction of therapists are trained to treat children. Currently, there are only 8,000 child and adolescent psychiatrists in the U.S. That’s 10 child psychiatrists per 100,000 children vs. the estimated demand, which is 47 child psychiatrists per 100,000. Psychiatrists, and others qualified to help, such as licensed social workers, licensed family therapists, psychiatric nurse practitioners, and others are also concentrated in metropolitan areas, leaving 70% of American counties without an appropriate provider. The result is significant travel distances to receive care and wait times to see a provider that average 7.5 weeks.
Coordination of care. Effective outcomes require not only that treatment be specialized for youths. They also require youth-specific coordination and continuity of care across stakeholders that include parents, school systems, and pediatricians. Pediatricians and schools can have a significant influence on kids and families but are not well-integrated into traditional youth mental health efforts.
Government regulations and funding. Before Covid-19, telemedicine regulations severely limited virtual care for youth mental health. Many changes were implemented during the pandemic, including waivers of state-specific licensing requirements to provide care, exemptions to prescribing, HIPAA rules that restricted telemedicine, as well as new CPT codes. However, federal and state governments are still debating which of these temporary provisions to make permanent. For example, only seven states still had licensure waivers in effect as of mid-November.
On the positive side, government funding for youth mental health has increased significantly. Pandemic-related disruption in schools and education drew significant attention to youth mental health issues, including an advisory from the U.S. surgeon general on the “urgent need to address the nation’s youth mental health crisis.” The federal government has since allocated an additional $1 billion in funding for a new School-Based Health Professionals program that aims to double the number of mental health professionals working in public school settings.
Additional barriers to effective care include affordability and coverage. Nearly half of psychiatrists are cash-pay only and do not accept insurance, which is much higher than other specialties. As a result, families on preferred provider organization (PPO) health insurance plans are 10 times more likely to pay out-of-network or out-of-pocket for child and adolescent behavioral health visits vs. primary care visits. This causes a massive equity gap, as the cost of care is prohibitive for many households.
Promising models of mental health care
Increased attention to mental health, driven in part by the spike in cases of anxiety and depression caused by the pandemic, has catalyzed massive venture capital investment in digital health startups. The largest wave has concentrated on adult mental health, mostly through employers. From our perspective as investors in this space, we are now seeing increasing momentum to develop digital mental health care models for youth. As new players enter the market, however, there are important factors to consider:
Kids are not small adults. Therapy programs for kids cannot be the same as those for adults. Because therapists need to actively manage multiple stakeholders when treating kids, including parents and sometimes schools, most specialize in working with children or adults, but not both. We believe that most adult mental health startups will not successfully expand into treating kids. One possible exception is Lyra, which just announced a new program for serving kids, apparently built from the ground up with a network of dedicated child and adolescent psychiatrists.
Be careful with drugs. Medications can be an important part of treating certain patients and a source of revenue for some mental health care business models. However, if a digital health startup makes money from prescriptions, what’s best for their business can differ from what’s best for an individual patient. Learning from the lessons of companies like Cerebral, responsible startups and their boards must proactively assess the potential for issues like influencing providers and overprescribing and should be guided by best clinical practice and transparent to stakeholders about areas of risk and their mitigations.
Integrated, coordinated care. The most successful care models will not be just traditional one-to-one psychotherapy delivered over Zoom instead of face-to-face. Care models that involve collaboration between clinicians and care coordinators or navigators (who can manage non-clinical follow-up) can produce better outcomes. In one review of nearly 80 clinical trials, researchers found that collaborative care doubled the effectiveness of traditional care. Personalized case management, more frequent interactions, and better coordination between all the parties responsible for a child’s care (parents, schools, primary care physicians) should improve adherence and outcomes. Partnerships that combine local, trusted community resources and on-demand, scaled digital resources such as self-guided learning modules would be powerful. However, the key barrier to the greater availability of these resources has been finding a way to compensate providers for nonclinical time that can’t be billed under a fee-for-service code.
Building an edge in patient acquisition channels. Many patient acquisition strategies have been tested for startups. Direct-to-consumer digital acquisition strategies like social media ads are appealing because startups directly control acquisition and retention. But over time, customer acquisition costs tend to rise significantly and unpredictably, making it difficult to continue to scale efficiently. Enterprise partnerships with groups like employers or payers, however, can give startups low-cost access to potential customers. But engaging these populations can be difficult or partner-limited, and growth is less controllable.
Companies can use interesting hybrid acquisition models to hone efficiency through business-to-consumer acquisition but add differentiated business-to-business partnerships to reduce average acquisition costs below those of competitors. Players like Daybreak, Hazel, and Cartwheel are pursuing partnership opportunities with schools, who traditionally have had little money and support resources, but have access to students and resident knowledge (albeit often scattered across teachers and counselors) on issues related to their students’ mental health. Fort is pursuing another novel channel, partnering with pediatricians as an acquisition channel since families often see them as the first point of contact for any health concern and a trusted source of advice.
Expanded services. Many patients and their families have multiple needs or could benefit from multiple services, such as individual therapy, group therapy, caregiver training, digital content and tools, and care coordination. For a business’s long-term viability, figuring out how to get paid fairly for additional services via consumer-pay subscriptions, ancillary billing codes, or value-based/risk-sharing contracts is just as important as the products themselves.
It’s tough to be a kid growing up in today’s world, and mental health will remain a top issue with significant unmet needs and opportunities. We believe that new entrants are developing creative and innovative solutions in youth mental health that will ultimately help to improve outcomes and access as well as reduce costs and inequity.
Greg Yap and Derek Xiao are investors with Menlo Ventures, a venture capital firm that funds digital health and life science startups at the seed, early-stage, and growth stages.
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