Associate Partner Discusses the Current State of the M&A Market for Medication-Assisted Treatment Clinics

When we talk about medication-assisted treatment clinics, what do we mean?
Generally, medication-assisted treatment (MAT) clinics are outpatient clinics that work with patients who have challenges with the use of opioids. Typically, they offer comprehensive services such as counseling, therapy and prescriptions for medications that help patients manage their addiction to opioids. The cost of care provided by an MAT clinic is usually much less than full-continuum or residential substance abuse centers. These clinics employ a variety of service providers, from physicians to nurse practitioners to licensed clinical social workers (LCSWs).

Recent reports indicate that substance use is surging during the COVID-19 pandemic, and the stress of the pandemic is having negative effects on those suffering with substance use disorders. How are medication-assisted treatment providers responding? What does this mean for the future of medication-assisted treatment?
You know, at the beginning of the COVID pandemic, I had three transactions for MAT clinics that were in the due diligence phase – and our buyers got a little nervous with everything that was going on surrounding the quarantine. But after a few weeks of gathering data, they realized that the census in these clinics had actually gone up. Because of the quarantine, patients suffering from addiction were having a hard time getting their medications, they weren’t able to attend their regular support groups and meetings, and they had more time on their hands at home. MAT clinics were able to step into that void and really come through for a lot of patients in difficult times. Now, many of these clinics are healthier than they were even pre-COVID, and I predict a sustained increase in demand for their services. We’re also seeing some payers increasing their reimbursements right now, and I think that will continue because the patient demand will definitely be there.

What are some other effects the pandemic has had on MAT providers? Are there any silver linings?

In my recent conversations with several MAT clinic owners, they tell me the real silver lining of these challenging times has been the increased acceptance of telemedicine. Regulators were quick to realize that patients needed continued care, but that they’d likely be reluctant to come in and seek it in person, so they made the decision to strategically loosen some of the restrictions surrounding the use of telemedicine. It’s allowed the clinics to revamp their service delivery model while maintaining their regular levels of reimbursement, so it’s been very helpful.

What is the current state of the MAT mergers and acquisitions market?
I’d say the current state of the market is active and buyers are pretty aggressive, particularly regional private equity-backed players. Multiples are really strong right now and valuations are high as compared to other healthcare entities. And I don’t see that going away anytime soon – we’re in what I would call the first wave of consolidation in the industry, and a lot of owners are recognizing that it’s the right time to make an exit. We’re also seeing a push in some states for insurers to play a bigger role in field of medication-assisted treatment, which is standardizing how clinics operate and encouraging them to move away from cash payments to Medicaid and insurance. That transition may be more than some small operators will want to take on, which will fuel the consolidation even further.

What kind of treatment providers are most attractive in the market right now – higher-end, out-of-network providers? Lower-cost community-based treatment models? Residential? Non-residential?
Generally, addiction treatment is moving away from out of network, high-luxury, residential or full continuum of care treatment to an outpatient model. The cost of care is just so much less than a residential treatment setting, and many MAT patients have Medicaid as their payer source, so an effective treatment where patients get regular medications and counseling but can remain at home is attractive.

Who is buying in the MAT market right now?
There really aren’t any national players in the market at this point, but there are several large regional players with private equity support behind them who are very active in this space. The buyers I’m seeing are often current clinic owners who are seeking to grow their footprint by consolidating operations, or folks who don’t necessarily want to start a new clinic from scratch, but know they can buy an existing clinic, operate it and expand it on their own.

What do you see for MAT market activity for the rest of 2020 and beyond?
I think we’ll see the MAT market continue to be very strong. As I said before, we’re seeing multiples in the six to eight range, versus other industries where they’re somewhere around five to six. I would bet on that continuing into next year.

If someone is thinking about selling their MAT clinic in the next 6-12 months, what should she/he be doing to prepare in the short and long-term?
I’d say spend some time figuring out what is really important to you – do you want to sell your clinic and leave the industry altogether, sell and hope to stay on with the new owner, or partner with another clinic and grow your business? Know what your goal is. Then, get your financial house in order. Make sure all your taxes are filed and your financials are buttoned up and reflective of the true state of your business. Finally, speak to an advisor who has experience in the field. No matter where you are in your planning process for the future, it’s never too early to establish a relationship with a specialist who knows this space and can keep your interests in mind as they monitor broader industry developments.