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Consider the market before expanding to new locations

November 17, 2014

With the increasing demand for treatment across the spectrum of behavioral health—from autism to eating disorders to heroin addiction—organizations might be tempted to expand their capacity. Once demand for services seems to outstrip an organization’s ability to provide them, the key question is whether to build capacity and, if so, how.

Opening additional facilities is one way to grow an organization organically. However, before programs move forward with any expansion plans, they should consider two key questions: Is the market ready for it? And is the organization ready for it?

Gauge external factors

The key issue when it comes to expansion is whether there is enough demand for services to support an additional facility. Over the past few years, Engage Behavioral Health, which specializes in children and adolescents, has five locations, each launched as part of an organic growth strategy based on need among populations in different parts of Florida.

To determine when the time is right to open a location and where it should be located, the organization focuses on two key criteria: service demand and staffing requirements. For example, to gauge demand in a given geographic area, the clinic maintains a list of families who call looking for services but do not live near existing clinics.

To ensure the facility will be properly staffed, “we will check to make sure there are local universities in the area that are going to be providing graduates that will be able to hire,” says Jennifer Rava, the organization’s founder. “When we have enough [potential clients] on our list and staff available, we will open at that location.”

Among behavioral healthcare organizations interested in expanding into other states, many would consider funding options first and foremost. For example, is there state funding available for their services, and is there a state mandate that requires health insurance carriers to include coverage for those services? Would a new location accept only self-pay clients? Who is the dominant commercial insurer in the market?

“The first stage involves conducting due diligence of each potential location and evaluating whether it will be possible not only to get an office started but to keep it going,” says John Galle, director of affiliate programs and expansion for the Center for Autism and Related Disorders, Inc. in Tarzana, Calif.

That includes demand for services, population density, funding and enough clients to keep any satellite clinic going. The organization has one corporate office and 47 centers in the United States.

Consider internal factors

Success through expansion also requires strong internal operations that can be replicated at the new site. That is why staffing is such a crucial element. Will the organization be able to transfer experienced staff to launch the new location while also hiring and retaining additional employees with the necessary knowledge and experience to maintain quality services across the network? With a workforce shortage in many states, finding manpower certainly can slow down expansion plans.

When Constellations Behavioral Services in Portsmouth, N.H., was considering expanding into more centers, leaders decided against it largely because of lack of qualified staffing.

“The field of applied behavioral analysis (ABA) is still in its growth years, so clinicians are at a premium,” says Tim Heald, the clinic’s executive director. “There is not a large, well-trained labor pool to draw from, either at the board-certified behavior-analyst or behavior-technician level, so we cannot simply open a new location and assume we can hire providers to staff it.”

Expansion is still on the horizon within the next few years as Heald and his colleagues continue to develop their professional team. He believes that expansion is most effective when clinicians from existing locations staff the new facility in order to ensure cultural transfer. This is particularly important because “having services provided away from the home office removes many of the informal controls that drive clinician behavior,” he says.

In place of regular contact and oversight by the clinic’s leadership, he suggests that clinics formalize the training and modeling of critical skills that often occurs on an ad hoc basis using a strict set of protocols.

Transferring operational and clinical excellence is important. A key element of a successful satellite location is ensuring that a new site is integrated operationally—performing tasks the same way across the enterprise. When Engage Behavioral Health opened its first new site, “we did not yet have an operations manual with all of our policies and procedures outlined,” says Rava. As a result, launching the first satellite clinic was a very difficult and time-consuming process.

Standard policies and procedures should include everything from office cleaning to monitoring service quality to answering the phone the right way. In fact, Rava considers clear policies and procedures so important that she goes so far as to suggest that organizations that do not have such policies and procedures codified and in writing should wait to expand until they do.

Finally, financials will also be important during expansion. Rava urges behavioral healthcare organizations to make sure they have ample reserves before undertaking any sort of expansion.

“We made sure that we had a good relationship with our local bank and a strong line of credit in case we needed to use it,” she says.

Licensing alternative

If a behavioral health organization is not ready for site expansion, there is an alternative to consider. Temecula, Calif.-based Hill Alcohol and Drug Treatment has developed a licensing program to help other organizations replicate its existing addiction treatment program. Because a key portion of the program is based on outpatient treatment, Rocky Hill, the clinic’s director, expects growing demand from insurers looking for a less expensive alternative to costly inpatient care. In addition to supporting new programs, “we also offer the opportunity for existing intensive outpatient (IOP) to expand into day IOP, partial hospitalization and ambulatory detox,” says Hill.

With each agreement, Hill Alcohol and Drug Treatment provides the licensee with some of the necessary tools to open a separate treatment program. Although it provides the framework and training, there is no franchise or other business relationship with the licensee. Instead, the clinic’s 14-inch-thick binder outlines policies and procedures developed over more than two decades, as well as videos and other tools that can be used in various elements of treatment.

“We are providing them with turnkey program with all of the critical elements included,” says Hill. “This is designed to guide the direction of the program, not to dictate the minutiae of how you do what you do. It takes care of the clinical part of the program, so that the team is free to focus on making the right business decisions.”

Operations are the cornerstone of these licensing agreements. They are exhaustive, covering everything from human resources and administration to clinical protocols and ambulatory detox.

“The best way to expand is to ensure that the new licensee has all of the clinical components to provide a good treatment modality,” says Hill. “We help with the element that allows them to expeditiously obtain state certification with a proven model of policies and procedures that are time tested.”

Each licensee spends one week at the facility so that the experienced staff can walk them through the elements involved in running the program. The visiting licensee spends time with the staff in billing, utilization review, nursing and the front office, while also sitting in on groups and family night to get a sense of how the program works.

“They get the basics, but it is up to them to create the name, the culture and so on for their own facility,” says Hill.

Each treatment facility is unique, as are its programs and its patients. Meeting the business and clinical needs will continue to be a challenge as the behavioral health segment grows.

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