It is no secret that there have been significant increases in the development of autism among children in the U.S. over the past three decades. The U.S. Centers for Disease Control and Prevention (CDC) acknowledges that, today, at least one in 44 eight-year-old children have been diagnosed with Autism Spectrum Disorder (ASD)1 and some autism prevalence estimates are higher.2 In addition to the high costs to families raising children with autism,3 the autism epidemic is becoming a big business opportunity for corporations.
About 10 years ago, states began mandating that insurance companies pay for Applied Behavioral Analysis (ABA) therapy for children diagnosed with ASD. This led to a boom in ABA service across the country,4 and insurance companies were forced to cover the cost of ABA therapy because it is the only treatment option that is government approved for doctors to prescribe and treat children with autism.5 For some families, ABA therapy is the only way their autistic children will receive any type of treatment.6
ABA focuses on behavior modification by rewarding certain “good” behaviors and punishing “bad” behaviors with the hope that behaviors will change over time. This type of behavioral modification can only be taught by professionals trained in the ABA technique.
The Demand for Applied Behavioral Analysis Therapy is Growing
The profit to be made in the ABA therapy market has been realized by private equity firms as they began investing in and buying up ABA centers across the country in recent years. In 2017, Coker Capital Advisors projected that community-based ABA providers could earn $10 billion and school-based providers could earn $7 billion in annual revenue.7 In 2018, the Center for Autism and Related Disorders was acquired by Blackstone for approximately $700 million and, in 2019, Rothschild acquired New England ABA.
In 2019, Patrick Krause, co-head of health care services for MHT Partners, a private equity firm in Dallas, said:
The market is incredibly robust. You have an expanding [autism] demographic population, you have commercial insurance lined up to cover it and there are not a lot of [providers] doing it on a large scale. It checks all the boxes you would expect for private equity being interested in it.8
Michael Maloney, president and CEO of Learn Behavioral, an ABA provider purchased by the private equity group LLR Partners in 2016, estimated that ABA therapy generates between $15 and $80 billion dollars each year based on estimated by the CDC.9
In 2019, TPG Capital, a Fort Worth- and San Francisco-based private equity firm committed $300 million of equity capital to Kadiant, a company offering ABA and related therapy to children with ASD.10 Katherine Wood of TPG Capital said:
Despite growing awareness of the need for autism services, many living with ASD still do not have easy access to high-quality, specialized care. With Kadiant, we hope to positively impact this imbalance by building an organization focused on providing clinical and operational excellence at scale.11
Does Private Equity Funding Help or Hurt Children with ASD?
Many parents find fault with the ABA model of therapy, especially after so many private equity firms have heavily invested in the field. Complaints about private equity backed ABA therapy point to the poor quality of treatment, including therapists using cookie-cutter templates to treat all children regardless of ability; demanding children engage in more and more hours of therapy; high turn-over rate of therapists, and ABA provider shortages.12
Some ABA providers disagree with the critics claiming that they personally make decisions about how many hours of therapy a child needs, not private equity firms, and that each child’s care is individualized.13
ABA therapy is supposed to conduct an assessment before the start of therapy to determine each individual child’s needs, abilities and goals. However, whistleblowers in the industry argue that the therapy centers funded by private equity firms skip these assessments and use the same treatment plans and goals with multiple children, regardless of a individual child’s ability. The maximum number of hours are being pushed on these children by private equity firm owners without considering other aspects of the child’s life, such as other types of therapy, school and family life. ABA providers have been caught submitting more treatment hours than there are in a day—in one case logging in 65 hours in a day—which prompted a federal watchdog agency to take notice.14
Eric Larsson, executive director of clinical services for Lovaas Institute Midwest, an ABA center that is not funded by private equity, emphasized the importance of individualized care when he said:
You can’t just walk in and hand people a book and say, ‘This is what we’re doing this week,’ because you’re going to totally miss the point of what this individual child and the parents need.15
As the private equity industry takes over the ABA market, the industry has seen a high ABA provider turn-over rate, which has a negative effect on children with ASD who depend upon and thrive with consistency. ABA therapists are not required to have extensive schooling or training. The only requirement is that they be at least 18 years old, have a high school diploma, undergo 40 hours of training and pass a test in order to administer ABA therapy.16
“This is like a full-time job for a young child. It’s shocking to me that without any science, 40 hours per week has become the standard in some places,” said Zoe Gross, director of advocacy for the nonprofit Autistic Self Advocacy Network.17
Other parents have a different view and are grateful that private equity firms have made it possible for ABA programs to be expanded and offered in many more locations. Without the funding, they would not be able to obtain ABA services for their children.18
Thomas Frazier of Autism Speaks offered a more optimistic point of view about private equity firms financially investing in ABA services. He said:
This is not necessarily a bad thing that private equity is getting involved. If we can standardize things, private equity may bring in the financing that allows us to expand. If we do things right, we could actually create a market that serves individuals and families better.19
Abuse Allegations Against Private Equity Backed ABA Center
Hopebridge is one example of an ABA center that was able to expand into other states and open a number of new clinics with a sizable investment from Baird Capital in 2018. Dennis May, chief executive director of Hopebridge, explained that the company is managing its growth responsibility and is keeping its standards consistent using uniform training and technology. He said:
It’s a capital infusion that’s allowed us to grow our staff, our number of clinics and also our clinical expertise. They’ve got a wealth of experience about previous health care companies that have gone through growth. We’re able to draw on their experience and expertise as we think about company infrastructure investments.20
In 2019, Hopebridge was taken over by the private equity firm Arsenol Capital Partners for a reported investment of between $100-500 million, giving the ABA therapy center a valuation reported to be at $255 million.21
In January 2022, Hopebridge had over 100 locations—up from 17 in 2018—and approximately 5,000 employees in 12 states. The corporation plans to expand again and open 40 new clinics nationwide in 2022 fueled by an investment from Arsenal Capital Partners.22 By August, however, the growing ABA provider faced allegations of abusive and unethical behavior. An investigate reporter uncovered allegations from employees, former employees and parents of abuse; high turnover of an ill-trained staff; lack of transparency and accountability ,and putting profit over providing services to autistic children.23
Kim Strunk, founder of Hopebridge denied the recent allegations…
We take all reports seriously and have zero tolerance for any abuse. We understand that every question and concern comes from a place of deep caring. However, we were unable to substantiate any of the [claims] through two independent investigations into the allegations in Athens, Georgia.24
Private equity firm’s investment in ABA therapy over the past decade has proven lucrative with some private equity firms realizing gains of 10-15 times the amount of their initial investment when exiting within five years. As of the 2020, 55 private equity firms had invested in ABA learning centers with 20 ABA companies developed. Of the 23 for profit large ABA companies (1,000-5,000 employees), more than 50 percent are either owned by or received investments from a private equity firm.25
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1 U.S. Centers for Disease Control and Prevention. Autism and Developmental Disabilities Monitoring (ADDM) Network. National Center on Birth Defects and Developmental Disabilities Mar. 31, 2022.
2 Cáceres M. Autism Rate Now 1 in 30 Among American Children. The Vaccine Reaction July 10, 2022.
3 Blaxill M, Rogers T, Nevison C. Autism Tsunami: the Impact of Rising Prevalence on the Societal Cost of Autism in the United States. Journal of Autism and Developmental Disorders 2022; 52: 2627-2643.
4 Summers J. As private Equity Comes to Dominate Autism Services… The Nation Apr. 2, 2021.
6 Bannow T. Parents and clinicians say private equity’s profit fixation is short-changing kids with autism. STAT Aug. 15, 2022.
7 Perkes C. As Demand For ABA Therapy Increases, Investors Buy In. Disability Scoop Oct. 23, 2018.
8 Pixabay C. PE Interest in Autism Booms Amid Increased Diagnoses, Insurance Coverage. Behavioral Health Business Dec. 2, 2019.
9 Furfaro H. Optimism greets investors’ sudden interest in autism therapy. Spectrum News July 9, 2018.
10 Fort Worth, SF private equity firm partners for autism therapy organization. Fort Worth Business Feb. 1, 2019.
12 Bannow T. Parents and clinicians say private equity’s profit fixation is short-changing kids with autism. STAT Aug. 15, 2022.
19 Perkes C. As Demand For ABA Therapy Increases, Investors Buy In. Disability Scoop Oct. 23, 2018.
21 Larson C. PE Firms Take Note of Increasing Demand for Autism Services. Behavioral Health Business June 22, 2022.
22 Coward K. Hopebridge Continues to Ramp Up Growth, Plans to Add 40 New Clinics in 2022. Behavioral Health Business Jan. 27, 2022
23 Matthew J. A new investigation throws private equity’s foothold in the autism services industry into question. Fortune Aug. 8, 2022.
24 Smead M. New Survey Questions The Entrenchment Of Private Equity In The Autism Services Industry. Ocupario Aug. 26, 2022.
25 Private Equity in Autism Services: Big Money in Applied Behavior Analysis (ABA) and the Effect on Ethical Practitioners and Client Outcomes. Business Insider Feb. 27, 2020.