Behavioral Health Opportunities Make Up Nearly 40% of Frist Cressey’s Investment Pipeline

Frist Cressey Ventures — a venture capital fund co-founded by former U.S. Senate Majority Leader Bill Frist — has big plans in behavioral health. With current investments in substance use disorder (SUD) treatment and telebehavioral health, the firm is looking to dive deeper into the space and help propel a new wave of behavioral businesses forward.

Founded in 2015, Nashville, Tennessee-based Frist Cressey invests in early stage health care companies that have the potential to revolutionize care delivery, quality and integration. And as of late, the firm is particularly bullish on the possibilities for disruption that exist in behavioral health, according to Christopher Booker, a partner at Frist Cressey.

“Frist Cressey Ventures starts with our mission: How do we partner with entrepreneurs to truly improve health care?” Booker told Behavioral Health Business. “If you want to talk about an area that is ripe for innovation, behavioral health is a big area.”

Specifically, Frist Cressey is looking for behavioral companies that are early in their life cycles and whose products and services have the potential to change the way behavioral health care is delivered.

According to Booker, 30% to 40% of the investment opportunities Frist Cressey is currently exploring are pure-play behavioral health providers. As recently as five years ago, that percentage was considerably smaller, he said, attributing the rise to more people, payers and providers prioritizing whole person care.

“While there are pure-play behavioral health opportunities that are out there, even the physical health [sector] is realizing how important it is to help address and provide access to these behavioral health issues,” he said.

Echoing Booker’s sentiments is Frist, a Tennessee health care luminary who previously represented his state in Washington, D.C. before co-founding the firm.

A heart and lung transplant surgeon by trade, Frist is the son of Bill Frist Sr., co-founder of the Nashville-based HCA Healthcare (NYSE: HCA), and the brother of Thomas Frist, also a HCA co-founder and the former CEO of the hospital chain.

“For too long, treatment for mental and substance use disorders has taken a backseat to traditional medical and surgical services,” Frist said in a statement to BHB. “As much as 40% of our health outcomes are determined by our behavior, yet our health system has minimized the importance of behavioral health.”

Frist Cressey’s behavioral outlook represents the faith the firm has in the new generation of companies looking to change that for the betterment of the nation’s overall health.

“We must collectively develop a broader strategy to bring mental health and substance abuse into the mainstream of health care quality improvement,” Frist said.

Frist Cressey’s behavioral approach

Frist Cressey’s investment approach is largely informed by major payers, providers and health organizations, who leaders talk to on a quarterly basis to take the pulse of the industry. When looking for companies in which to invest, the firm puts a premium on superior talent at the management level, as well on businesses leveraging technology to bring new products and services to market.

When Frist Cressey first makes the decision to pour capital into a company, investments can range from $2 to $15 million, with early stage behavioral health being a big focus for the firm.

“Once we make an investment, we’re trying to do a first or second round of institutional capital,” he said. “Being early in the lifecycle of the business, what we’re trying to do is focus on adding value in three areas: recruiting, connecting and executing.”

That includes making sure investment targets recruit top talent at the executive and board levels. Plus, ensuring companies are connecting with the right people to accelerate their growth is also a high priority.

Given the access issues that have long plagued behavioral health, Frist Cressey is especially interested in investing in companies that make it easier for people to get treatment. In many cases, that means telehealth, which has risen to prominence and proven its worth especially amid the pandemic.

Going forward, virtual care is primed to be a bigger part of the health care landscape, with opportunities in behavioral health specifically abounding. In addition to prioritizing companies that increase access, Booker said demonstrating quality outcomes is also very important to Frist Cressey.

“Can you show and demonstrate outcomes within the market to help prove it, just like you do in the physical health space?” Booker said. “There’s still a lot of segments that don’t have access. But I think over the next five years, what you’re going to see is a major focus and a major emphasis on outcomes.”

Past behavioral investments

For more insight into the type of behavioral companies Frist Cressey is interested in, look no further than their current investments, which include organizations such as Spero Health — a Nashville-based SUD treatment provider — and Array Behavioral Care — a longtime telebehavioral provider.

One of the nation’s largest office-based opioid treatment providers, Spero operates over 55 clinics across Tennessee, Kentucky, Indiana, Ohio and Virginia, while also offering telehealth services.

Booker said Spero is a prime example of the type of behavioral health organization Frist Cressey looks to invest in: It demonstrates strong clinical outcomes and strong executive leadership.

Frist Cressey initially invested in Spero in 2018, shortly before the company was founded using the assets of 20 freestanding SUD treatment clinics. It partnered with the investment firms Heritage Group, Health Velocity Capital and South Central, Inc., along with the founding management team, to officially launch Spero.

“The clinical model of Spero … was what got us excited,” Booker said. “They were starting to demonstrate and really prove … the outcomes of their treatment plan. And then they had a management team that could accelerate the growth of that business and get them into now over 50 locations.”

Meanwhile, Array Behavioral Care’s use of telehealth — and its potential for the industry — was what initially caught Frist Cressey’s attention.

Based in Mt. Laurel, New Jersey, Array is a telebehavioral health pioneer, as it has been leveraging the delivery method since 1999, when the company was founded as InSight Telepsychiatry. In 2019, InSight merged with Regroup Telehealth to become the largest telepsychiatry company in the nation, with the joint company eventually rebranding as Array earlier this year.

Array partners with payers and providers to virtually deliver behavioral health care, putting a special emphasis on serving underserved communities.

In 2018, Frist Cressey contributed to Regroup’s $5.5 million Series A funding round, with Booker subsequently becoming a board member for the company.

“There, it was more of an access play,” Booker said about Frist Cressey’s initial investment in Regroup.

Even before the pandemic compelled states and the federal government to relax restrictions around telehealth services, Booker said Frist Cressey could see telehealth’s potential to bring behavioral health care to more people and to become more widely reimbursable one day.

“[It] was, ‘Hey, wait a second, we could use telehealth, [and] a unique reimbursement model … to expand access for these prescribers and even non-prescribers within the community,” he said.

Since InSight and Regroup merged, the telehealth company has hired over 320 clinicians, with Array CEO Geoffrey Boyce telling Behavioral Health Business in March that the company is also eyeing 30% growth in 2021.

Frist Cressey’s investment into telehealth providers like Array — along with its investment in the online education platform PsychHub — may prove to be particularly lucrative in the future, as data shows that a majority of behavioral health providers plan to continue offering virtual assistance post-pandemic.

Additionally, the Centers for Medicare and Medicaid (CMS) has broadened its telehealth reimbursements, with over 144 Medicare telehealth services being temporarily covered under its 2021 payment rule, along with several other services now being reimbursed on a permanent basis.

On top of that, various legislation has been introduced in Congress over the last year to make some telehealth waivers enacted during the pandemic permanent.

“One of the reasons why throughout COVID that behavioral health services have really grown [is because they] are more easily consumed virtually than physical health, and a lot of health care was done virtually,” Booker said. “The pandemic … was an experiment into telehealth. [Companies] opened up telehealth across the board to provide services, and what we discovered is the services that were provided — particularly the behavioral health space — were … a great way to provide access.”

Still, for telebehavioral — and behavioral health in general — to reach its full potential, Booker said reimbursement structures need to be improved, noting that they are not standardized in behavioral health like in physical health.

“On the behavioral health side, you still have a lot of either uncertainty or changing dynamics within the reimbursement structures,” he said. “That hasn’t fully been standardized … . That’s one thing that’s a little bit different [from physical health].”

Overall, Booker is encouraged about the future of the behavioral health space and Frist Cressey’s investments in it.

“A lot of our interest in [behavioral] is because there’s been such an emphasis, particularly over the last couple of years, within the space,” he said.