LifeStance Health Group (Nasdaq: LFST) will cull sites and reduce the number of payment contracts in its transition from growth to profitability.
The company’s CEO, Ken Burdick, said the shift requires LifeStance Health to examine costs and administrative burdens in 2023. But once that competency chapter is complete, LifeStance will once again transition to strengthening its outpatient mental health segment.
“What we’re really setting this company for is we’re building and strengthening that foundation, [that] “Then we’re going to set ourselves up for the next big growth phase,” Burdick said at the 2023 JPMorgan Healthcare Conference. “Because we have a lot of runways ahead of us, we want to be ready for that.”
LifeStance Health will likely close “a few or more” centers in areas with low levels of in-person visitation. Across the Company, approximately 70% of LifeStance appointments are booked via telehealth.
Previously, the company sought to give each applicant their own exam room. You will abandon this approach. Going forward, it will look at more efficient uses of office space including the practice of “hotels. ”
“As telehealth visits continue to become popular, we’re now looking at our footprint,” said Burdick. “We have 600 centers. Do we need 600? Probably not.”
Reducing the administrative burden
Administratively, 50% of LifeStance Health payer contracts account for 5.7% of patient visits. The company has more than 400 payer contracts. Having so many contracts is a burden to manage.
“We’re not talking about 50% downsizing, certainly not any time soon,” Burdick said. “We can simplify our business by not trying to manage all those contracts where a large number of them – I mean literally over 100 – have very little traffic attached to them.
“There are ways of simplification and standardization that won’t hinder the patient experience and the physician experience.”
other efficiency efforts already described Leaders by LifeStance Health include reducing mergers and acquisitions, de novo growth, improving the patient and provider experience with technology, and focusing on growth in hiring more physicians at existing locations.
Burdick estimates that the efficiency efforts will be completed within the next 18 to 24 months.
“While it’s not particularly exciting, what you’ll hear a lot from LifeStance is the things we’re doing to drive a scalable platform, focus on end-to-end process improvement, some simplification, some standardization,” said Burdick.
A big part of streamlining its management, Burdick said, will require automation and standardization. LifeStance has a long history of acquiring companies but its integration process is often lengthy. It has made 86 acquisitions over the life of the company.
LifeStance is preparing for growth
LifeStance Health will not seek to increase debt or equity in the near term. Burdick said it could support itself with its balance sheet after operational improvements.
Over the next two to three years, LifeStance Health will partner with clinician practices to enable behavioral health integration partnerships and establish its value proposition for value-based care.
“Value-based care is still a small minority of care provided in the United States today and that’s clinically speaking,” Burdick said. “In terms of mental health, it’s in its infancy.”
He added that today’s value-based care arrangements are as simple as patients getting an appointment within two weeks.
All of these efforts prepare the company for its next wave of growth. Burdick echoed a number LifeStance Health executives shared previously — that LifeStance’s diverse physician group of 5,400 members and 600-location footprint represents 1% of the outpatient mental health market.
“Even though we’re big, there’s a lot of distance involved. It’s very exciting,” Burdick said.