Starting New Behavioral Health Treatment Programs

There is a lot of interest in starting new behavioral health treatment programs. The Affordable Care Act, Mental Health Parity, Medicaid Expansion and recognition of the demand for behavioral health treatment are driving treatment program expansion.

Our focus here is not on opening a private practice, but on developing a behavioral health treatment facility, like a residential drug treatment program or mental health treatment facility.

As behavioral health consultants, we help organizations throughout the country plan, develop or expand new psychiatric inpatient units, drug and alcohol residential treatment facilities, and specialty behavioral health services like eating disorder treatment centers.

Unless you are part of a hospital system with experience researching and planning a new or expanded service line, knowing how to begin can be confusing; here are a few basic considerations.

Basic Steps to Take Before Starting a New Drug and Alcohol or Mental Health Treatment Program

  1. Get the regulations – every state as well as the federal government regulate residential drug treatment programs and mental health facilities. These are always extensive, complex, and require a tremendous amount of operating knowledge. What about just buying a policy manual? This rarely works unless you also know how to make the policies work day to day. Developing the policies, procedures and forms, even for someone with experience, can take many months of work. It’s a good idea to discuss your interest with the state department of mental health and/or substance abuse treatment to find out what exactly is required. A behavioral health compliance consultant will assure that your new program meets state and federal licensing requirements.
  1. Learn about accreditation – if you want to accept private insurance, Medicaid, or Medicare your program will need to be accredited by the Joint Commission, CARF, or COA. These are extensive to say the least, often involving over 200 standards, each with specific evidence of compliance requirements. A behavioral health accreditation consultant can help you through this often complicated process.
  1. Understand the competition – are competitors in your market already operating a program similar to what you are planning? What is your geographic market? Things to know include: how many beds, what their occupancy rate is, how large of an area they serve (e.g. local, state-wide, national), whether or not they are part of a larger system, and their reputation. While you might believe your treatment philosophy, your own recovery process is the best, chances are fairly good that someone else may already being doing that. And, your market may simply not need more residential drug and alcohol treatment programs or inpatient psychiatric beds.
  1. Find out about reimbursement – private pay, health insurance, Medicaid, Medicare are associated with a population demographic; essentially are there enough people in your market with the payer mix you plan? Researching the “mix” of these payer sources can be done using census information but will require that you define your geographic and socioeconomic market, a very good statistical capability, and confidence working with large data sets.
  1. Determine costs – unless you are able to self-fund the startup you’ll need investors and the ability to borrow money from a bank or if a non-profit, donations and grants. In either case, you’ll need to identify and determine cost and revenue drivers like operating expenses, staff to client ratios, the impact of licensing and accreditation regulations, special physical plant requirements for behavioral health facilities, human resource laws, and start-up costs through break even – to name just a few!
  1. Develop a written business plan –articulate in writing the key components of making the program successful: financial elements like revenue, expenses, payroll, debt service, facility and real estate costs, cash flow, break-even point. Describe how the agency will meet compliance and accreditation requirements. Address the market: competitors, marketing and referral sources. Describe the organizational chart, Board of Directors, professional staff recruitment, and staff training plan.
  1. Consider an independent Feasibility Study – before spending and risking a lot of money on a new behavioral health program, it is often worth getting an expert’s assessment. A feasibility study uses hard data and field experience to determine whether or not a new or expanded mental health or substance abuse treatment program is financially viable. Is there now and will there be over the next five years a community need (“demand”) will the operation be financially sustainable.

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