Forces Shaping the Next Round of Innovation and Investment

Federal Momentum Calibrated by State-Level Realities

A combination of forces, including federal legislation and national advocacy has focused market attention on autism and fueled investment in companies providing technologies, services, and therapies across the sector (See Figure 4).

As noted previously, the macro forces advancing behavioral health combined with federal legislation around autism have shaped how states are prioritizing the treatment of citizens with ASD – resulting in a complex backdrop that has shaped recent market moves and will inform future M&A and investment activity.

For nearly two decades there has been bi-partisan support to advance the treatment of autism. Since the signing of the Combating Autism Act in 2006 under the Bush Administration, there has been considerable momentum and support for autism in the executive branch at the federal level. The Act opened the door for autism care by federally authorizing research under various avenues and increasing awareness and knowledge about autism.

The Obama Administration reaffirmed and reauthorized the 2006 Act under The Autism Cares Act of 2014. This legislation emphasized breaking down barriers for youth and young adults when transitioning from school-based to adult-based services.

The autism sector has benefited from more recent federal legislation. As of 2019, an insurance requirement applies in various capacities across all 50 states, providing tailwinds for improving care for those with autism. Moreover, the Autism Cares Act of 2019, during the Trump Administration, increased spending on autism efforts, reauthorized and expanded the Interagency Autism Coordinating Committee (IACC), and focused on services for the entire lifespan of people with ASD.

The Biden administration has supported behavioral health initiatives with its 2022 Bipartisan Safer Communities Act. This bill granted hundreds of millions of dollars to school behavioral health programs for children and families. This bipartisan support and continuing legislation over the past decade demonstrates strong momentum at the federal level for those with autism.

Along with presidents and lawmakers, it is important to note that many advocacy groups have also played a critical role in raising awareness, advancing legislation, and providing resources.

Autism Speaks, a prominent advocacy organization, sponsors autism research and conducts awareness and outreach activities for families, governments, and the public. This nonprofit has championed an increase of $3 billion in federal funding for autism research since 2008 and conducted public service campaigns that have increased autism awareness by 50 percent.
The Autism Society of America shares similar goals and accomplishments in supporting autism care and raising awareness. These advocacy groups are crucial to centralizing care, organizing around care models, and setting up a national framework and standards for behavioral health.

FIGURE 4: SUMMARY OF AUTISM RELATED LEGISLATION UNDER THE LAST FOUR ADMINISTRATIONS

In parallel with federal tailwinds and national advocacy, states are beginning to focus on autism with a patchwork of state-level requirements emerging. While national-led initiatives like the Early and Periodic Screening, Diagnostic, and Treatment program (EPSDT) have been around for decades, the federal government only recently clarified to state agencies that all medically necessary services for autism must be included. Even with these mandates, barriers still exist for access to care (see figure 5). Key barriers include states that introduce non-quantitative treatment limits, cannot provide timely and efficient access to care, or limit the scope of treatment by age, income levels, or acuity.

National Platform Case Study:
Centers for Autism and Related Disorders (CARD)

The company Centers for Autism and Related Disorders (CARD) was founded by Doreen Granpeesheh in 1990. Under Granpeesheh’s leadership, CARD grew to ~180 centers in 2018 before being acquired by Blackstone (NYSE: BX) later that year, with the goal of propelling CARD’s growth (and continuing the trend of private equity activity in the autism sector). Blackstone grew the company to over 250 centers before labor dynamics, macroeconomic conditions, and operational infrastructure issues started to impact the business.

CARD’s rapid expansion caused a massive need for BTs across the country at a time when unemployment was low and inflation was rising, especially during and after the COVID-19 pandemic, making it difficult to attract and maintain talent. Compounding the issue was insufficient operational infrastructure, leading to endemic
struggles with patient management resulting in appointment cancellations, unpredictable scheduling, insufficient hours for the BTs, and lost revenue from the missed sessions. Furthermore, reimbursement rates did not keep pace with the operational cost inflation, and CARD did not have the population density of regional market concentration to command more competitive rates, compressing profit margins.

While the traditional playbook for scaling a healthcare services business was deployed, where size brings scale and the ability to leverage centralized costs, CARD’s operational infrastructure was ill-equipped to support the business’ rapid expansion. This case study highlights the contrast between autism platforms that have focused on aggressive national growth and more local or “superregional” providers. As we reflect on what’s next for the sector, we’re excited by the prospects for these more local and super-regional solutions, as their more focused geographic footprint gives them stronger command over both the supply of talent in their areas as well as the provider and insurance relationships needed to drive patient referrals.

Additionally, state-level mandates inform how benefit plans are designed and what autism services and therapies are required, and likely reimbursed. For example, Colorado requires all health plans to provide coverage for a child’s assessment, diagnosis, and treatment for ASD. However, in New Mexico, coverage is only limited to well-baby and well-child screening for diagnosis and treatment of ASD. While this is just one example of the state-by-state coverage requirements, these types of variations can create confusion for payers, providers, and patients alike – in addition to shaping how companies in the autism sector build and scale their companies and practices going forward.