Universal Health Services is the largest behavioral health provider in the U.S., when it comes to brick-and-mortar facilities. But the King of Prussia, Pennsylvania-based health system’s virtual services took a major leap forward on Monday when it closed its acquisition of Talkspace, a major player in the booming online therapy market.
With the $835 million deal, UHS says it’s now able to serve patients at any stage of their mental health journey, whether they’re looking for a one-off therapy session or 24/7 inpatient care. It’s a major bet on continued demand for behavioral healthcare, which has surged as conditions like anxiety and depression become more prevalent and stigmas around seeking care erode.
UHS is confident that its gamble on “à la carte” behavioral health services will pay off, according to CEO Marc Miller. It’s the driving force behind UHS’ growth prospects, and a key element of the company’s pitch to investors amid challenges facing hospital operators, he said.
Healthcare Dive caught up with Miller to discuss the acquisition, how it fits into UHS’ larger strategy and the likelihood of future deals.
Editor’s note: This interview has been edited for clarity and brevity.
HEALTHCARE DIVE: UHS is wagering a fair amount of money on heightened demand for behavioral healthcare continuing. What are you seeing in the system that makes you confident Talkspace will be a value driver?
MARC MILLER: It’s been obvious for some time to us. But it just keeps getting reinforced that the demand is out there, and it's not necessarily being met.
As we looked at our own business prior to Talkspace, there was example after example in many states of unmet need. Some of that is just because folks can’t match up with the type of service that’s being provided in a particular location. There’s certainly reimbursement issues, coverage issues, things like that. We’re in 40 states right now, but we offer different things in all these states. So we’re trying to make sure that our offerings start to match up everywhere, and this acquisition is going to go a long way in doing that.
Are there particular areas in UHS’ geographic footprint where demand for behavioral healthcare is highest?
No. It’s across the board, and it’s episodic. Some months you’ll see it more in a certain part of the country, but it varies overall at different times.
In March, CFO Steve Filton said that acquiring Talkspace would help UHS get around staffing shortages that create bottlenecks for existing patients to get behavioral healthcare, and that Talkspace would also be a gateway for new patients to access UHS’ other services. Walk me through the benefits here.
There’s a lot. I don’t remember the staffing comment. But there have been a lot of staffing discussions over the past couple of years. Our staffing is in a much better place than it was post-COVID.
As we look to expand our tele-services — we’ve been providing tele-services for many years, but at a much smaller scale than some of our other services. Obviously, there are a lot of folks that think of us as as an inpatient provider, but we've got a robust network that provides intensive outpatient. We've got significant partial hospitalization programs. We’re trying to make sure that we meet the patients where they need to be met.
When you talk about demand for mental health services — the way we look at it, when we started to embark on this in particular, we saw an opportunity not only to tap patients who have been utilizing Talkspace for a period of time into the UHS network, but also vice versa, and maybe just as significantly, many UHS patients who have never gotten tele-services.
Now we're going to be able to offer a product within our own family that they might be better suited for. We’re going to be able to now offer to the patient a whole host of à la carte menu items, so that people are getting treated in the proper way in the place they need to be treated.
That’s going to be a game changer, because we'll now be the only company in the United States that will have a nationally scaled, end-to-end continuum in behavioral health. We'll be able to offer something that nobody else offers.
Is UHS open to future acquisitions in virtual or behavioral healthcare?
Yeah, absolutely. We’ll have this continuum but we want to always continue to make it more robust. If there are opportunities out there that make sense for us as add-ons, we're going to take those opportunities.
We’ve known about Talkspace for many years. We’ve talked about different partnerships with them. We’ve been very impressed with them. When they decided they were going to try and transact, we already knew them. That’s the case with a lot of other companies as well. If one of them were to want to transact later on, we’re a natural area for them to look to.
What makes a target attractive for UHS?
It depends. We’re not going to be aggressively acquisitive. It depends on who’s going to come to us. We’re open to opportunities if they present themselves, but we’re not going to seek them out.
If there are areas that we’re focused on, it’s outpatient. We’ve done a great deal on the inpatient side. We continue to add beds where we feel that they’re needed. But we are very focused right now on outpatient.
I’ll go back to Talkspace for a second. They’re so well run. And they have such a competitive advantage on the technology side — their IT folks are at the top of the industry. That’s what excites us, and so that would be the same as we look forward.
How will UHS’ focus on expanding in behavioral health help the system weather headwinds facing hospitals right now? More Americans losing insurance from the loss of expanded Affordable Care Act subsidies and looming Medicaid cuts, for example, are top of mind.
The things you bring up — these are real issues. I will tell you that the need for more mental healthcare is not waning. And I look at a lot of these things as cyclical. There are certainly some pressures with reimbursement right now. We're going to have a new Congress by the end of this year, and we'll see what happens there.
We’re in constant contact with the folks in D.C. They're asking us our opinions, and we’re not shy to tell them that. We need to be paid fairly so that we're able to provide the care that's needed in this country. And they do understand that there have been some significant adjustments this year from this Congress, from what I understand.
This is a bipartisan issue. Folks on both sides of the aisle are telling us that it's their hope that some of this gets adjusted in the future, because they recognize that a company like ours will probably be okay making it through these ups and downs. But there’s many not-for-profit providers all through the country, and certainly in some of the rural areas, that are having much more significant issues than we are. So I would expect that the situation would improve in the coming years.
How would you pitch UHS to investors leery about betting on your company amid these challenges, both those industry-wide and those unique to UHS? Shaky volumes and surprise losses in some facilities, for example, led UHS to downgrade its guidance in July, and your stock is down more than 20% year to date.
I get that question every week. You’re hitting it right on the head. I try to focus on a couple of things.
Number one, I can’t tell you where to invest your dollars. If you’re going to invest in healthcare, it’s us or one or two others that are at the top of the industry. And that’s just a fact. And most folks agree with me on that.
I have a very positive long-term outlook on this business, and especially on our company. We’re making the right moves to continue to be profitable, and the way that we’ll continue to do that is to provide top-quality care. We’re going to have more patients and more physicians who choose us for their healthcare, and that’s going to put us in the position that we need to be in.
This is a very difficult business, and it’s one of the things we talk about when folks ask us these various questions. It’s a tough patient population. We’re the best suited to handle that patient population. So if you’re investing, whether it’s dollars or in care, that’s why people choose UHS because they know that we have top-end facilities, providers, and staff. And that’s not going to change.
We’re only enhancing that. Acquisitions like Talkspace are a perfect example of what we’re able to do that a lot of others aren’t. This is a very costly acquisition. But we’re happy to do it, because it’s the right thing for our patients. And ultimately it’s going to be a great financial decision.
