TripleTree's Perspective

Similar to other nascent and rapidly growing industries, the ABA marketplace has certainly experienced its own growing pains. Following the initial wave of investment into this space, there has been market rationalization in balancing the attractive growth tailwinds, while understanding the practical realities of running profitable, labor intensive, specialized healthcare services businesses. The initial "cohort" of investments in the late 2010s was reflective of investors underwriting an emerging macro trend of increasing diagnosis and market awareness, however private equity investments were made across a variety of untested models - at nearly any price for fear of missing out on the new market opportunity. A handful of these early autism and ABA companies have struggled to scale profitably as they grew beyond their infrastructure and did not have the technology or operational grounding to adequately support their staff and clients.

This second "cohort" of autism and ABA businesses weathered the unexpected COVID-19 storm while investing in key areas to drive sustained growth and scale, creating a set of core strengths for winning platforms:

Experienced management teams with multi-site and/or home and community-based healthcare experience
Methodical growth strategies in markets with attractive characteristics
Density-first approach focused on becoming a local and regional leader in core markets
Intensive focus on operational excellence (e.g. clinician utilization, recruiting, scheduling, intake, etc.)

Standardized clinical best-practices with robust reporting and outcomes capabilities
Strong, bilateral payer relationships to support reimbursement and new payment models
Excellence in Human Capital Management to accelerate hiring while improving retention
Calculated investments in the necessary technology and infrastructure to support scalable growth

We are at a unique moment in time. 2023 has been a critical execution year for ABA providers and those that learned from the challenges of the past have experienced strong growth and profitability, while delivering better outcomes to clients and payers. The headlines are simple and compelling:

ABA Therapy is a large and rapidly growing industry – this is a $75 billion industry growing 6% per year
Labor markets are improving – healthcare labor inflation has dropped by half year over year (7.4% in June 2022 to 3.7% as of July 2023)
Reimbursement is increasing – TripleTree has spoken to several providers who have received meaningful rate increases (e.g., in the range of ~5.0-20.0%) from payers large and small (both commercial and Medicaid) while also striking national contracts in a number of cases

FIGURE 7: FORCES SHAPING FUTURE SUCCESS IN THE AUTISM SECTOR

TripleTree is extremely bullish about the future of the autism sector, and ABA therapy providers and supporting technology vendors. With an appreciation for the market activity over the last decade and a full understanding of the forces shaping what’s next (supply and demand imbalance, federal momentum calibrated by state-level realities, and the correlation between clinical excellence and reimbursement), we anticipate continued interest and investment in the sector (See Figure 7).

The market need is exceptionally strong, the development of new treatments and technology is accelerating, and the entire healthcare landscape is paying attention. The ABA future is very bright, and we look forward to a very active 2024 and beyond!