The United States is currently in the midst of a mental health crisis, brought on by the pandemic and its related lockdowns, leaving treatment providers struggling to keep up with the rising demand for care. The National Institute of Mental Health reports that in 2021, one in five adults in the US lived with mental illness. To address this urgent need, private operators, state and local governments, and health systems are racing to increase the number of psychiatric hospitals, addiction recovery centers, and other behavioral health clinics.
The behavioral health market is expected to grow to $105 billion by 2029, up from about $77 billion in 2021, according to industry research organization Fortune Business Insights. The recent signing of a bill by President Biden, which ended the pandemic national emergency, is expected to increase the number of in-person visits to these clinics.
The mental health crisis can be traced back to the 1990s, when state mental illness institutions closed down with the expectation that patients would receive services in community settings. However, funding for mental health care never materialized, leading to the current crisis. In response, behavioral health clinics are being rapidly built across the country, with medical building developer PMB in San Diego accruing $700 million in behavioral health work. One of PMB’s projects is a joint venture with Riverside County, California, to develop a five-building behavioral health village.
The increase in investment in mental health infrastructure is largely due to the 2010 Affordable Care Act, which required insurers to pay for the treatment of mental health conditions such as addiction, autism, bipolar disorder, depression, and eating disorders in the same way they paid for physical health care. At the same time, the discomfort associated with needing behavioral care subsided, leading to more people seeking it.
Some real estate investment trusts are transforming senior housing, skilled-nursing facilities, and other properties into behavioral health clinics. Sabra Health Care REIT, for example, is investing $836 million to convert 18 of its existing and newly acquired properties into centers for addiction treatment and other conditions. Landmark Recovery, an addiction treatment provider based in Franklin, Tennessee, leases half its space from Sabra and three other real estate investment trusts. It operates 14 locations and plans to open 23 more by the end of 2024, expanding to 16 states from nine.
Sa’Terra Gilbert, who survived a drive-by shooting in September 2020, found a safe haven in a Landmark facility after battling years of substance abuse. “That first week was the toughest; I wanted to leave,” said Ms. Gilbert, who now helps past patients as an alumni coordinator with Landmark. “But the staff helped me see what life could be like.”
Acadia Healthcare, a $6.4 billion provider of behavioral care in 246 facilities in the US, has opened 16 opioid treatment centers and two acute care hospitals over the last two years, and last month it broke ground for a 100-bed acute care hospital in Mesa, Arizona. The company has also added 2,600 beds at its existing facilities since 2015 and expects to keep expanding them by some 300 beds annually for the foreseeable future. In addition to its stand-alone operations, Acadia intends to fuel facility growth through acquisitions and by continuing to increase its partnerships with health care systems.
Dr. Jeffrey Woods, operations group president for Acadia Healthcare, noted that the pace of expansion is much more accelerated than it was even five years ago due to the gaps in accessible behavioral care. “The pressure at the front door of behavioral health hospitals — and still emergency rooms — is enormous,” he said.
