Speaker 0: Hi, everyone. This is Lucas Voss with Becker's Healthcare. Thanks so much for tuning in to the Becker's Healthcare podcast series. It's great to have you. Today, we'll be discussing how to optimize behavioral health benefit expense management with a great tag team of guests.
I'm excited to have them. Charles Phan, he's the president of Headspace, and Charlie Andres, he's the lead actuary at Headspace. Charles and Charlie, thanks so much for being here today. It's great to have you.
Speaker 1: Absolutely, Lucas. Thanks for having us. Thrilled to be here.
Speaker 2: Yeah. Super excited to be here.
Speaker 0: I wanna hop right into the conversation, but for those that might not know you yet, I do wanna start us off with a little bit of an introduction to who you are, what you do, who health Headspace is, and and your work in health care. Charles, I'll start off with you.
Speaker 1: Yeah. Thanks, Lucas. As you described, I'm the president of Headspace. I've spent nearly three decades in health care as a care provider, a consultant, and a business leader with the last decade or so, being in behavioral health. But I actually started my career in consumer products.
And since then, I've been bringing the consumerism kind of mindset into population health and value based care types of of models. You know, largely, my work is using this consumerism lens to drive better patient outcomes at scale through greater engagement, improved outcomes, you know, making the overall care model work better at scale.
Speaker 0: I'm excited to talk about that today. It's certainly one of the big trends in health care is the consumer aspect. Excited to have you. Charlie, over to you.
Speaker 2: Awesome. Yeah. So my name is Charlie Andrus. I lead our actuarial practice here at Headspace. Actuarial encompasses all things risk, ROI, and pricing.
I've worked as an actuary specifically in digital health for the last five years, wearing all sorts of hats that's required at a smaller company while maturing their actuarial practices as well. Prior to the jump to digital health, I worked in actuarial consulting, where I really specialize in the intersection between data science and actuarial work. So I've been really fortunate to see lots of different parts of the industry, and I've always been always leaning to the more innovative innovative side of health care and actuarial work. And so the time in Headspace has just been super interesting and super special to me, and I'm so psyched to hear to talk to you guys.
Speaker 0: Yeah. I'm excited to have you as well. This is gonna bring an exciting lens to the conversation too. I wanna start us off with level setting the conversation a little bit too and talk a little bit about the spending that's been going on in behavioral health. Again, it's been more than tripled over the past two decades.
There's been a lot of talk about that here in health care. And, again, it also continues to climb 2026 into 2027 and certainly beyond. How is the outpatient therapy system contributing to these rising costs? Charles, we'd love to start off with your perspective here.
Speaker 1: Yeah. Thanks, Lucas. I would say that, to your point, you know, the behavioral health spending in the aggregate has tripled over the past two decades, but I would argue that, there's really an era of kind of before, say, 2020 and then after 2020. You know, a decade ago and and earlier, the industry's challenges were largely all about access to care. Right?
In some regards, we were almost just, like, begging for more outpatient therapy, But it was constrained on both the demand side as well as the the supply side. On the demand side by consumer stigma and on the supply side by provider supply. And in many ways, you know, in the past, you know, since 2020 or so, we've actually seen a lot of these barriers actually have been now meaningfully addressed within The United States. You know, there's been a lot of anti stigma efforts on the demand side. We've had a lot of very access friendly or pro access regulations.
And then there's been a substantial increase in just the availability of the provider base, especially through virtual care models. But while we're celebrating this, I think we're also now somewhat facing the opposite problem, which is how to ensure the right care at the right time. As you cited, you know, behavioral health cost continues to rise at levels that are, like, multiples of overall medical cost, inflation. That behavioral health is is more than double right now. But what's different is in this latest era, the majority of this behavioral health spend is not coming from inpatient or emergency room use.
It's actually being driven by outpatient therapy utilization. So today, we're at roughly $60,000,000,000 of outpatient behavioral health therapy that's being delivered in The United States. You would expect, right, if this were primary care, when we're thinking about primary care versus specialty care, you would expect that had primary care doubled, you would see a reduction in inpatient bed days and ER usage. What's really interesting about this behavioral health trend is we're not seeing that. We literally doubled the amount of therapy, but inpatient bed days remain relatively flat to slightly increasing, and ER usage is doing that as well, which really starts to beg some questions on, you know, how do we make sure we're getting actually right care, right time?
The other kind of conundrum for the payers is that because of a lot of the regulation that I was describing, right, things like the mental health parity act and things like that, there is actually very little ability for your classic payer to deploy, their utilization management or their medical necessity sorts of of requirements, which means, you know, in short, we've got almost like a tiger by the tail here. There's rapidly increasing outpatient trend, And it's not just outpatient trends contributing to behavioral trend. It almost is the trend in many respects.
Speaker 0: Charlie, Charles outlined this in a in a fantastic way in terms of what this means in an old from an overall perspective and what this looks like in The United States. What does this look like from an actuarial perspective? Right? How are you seeing these contributors making a difference to these rising costs?
Speaker 2: Yeah. Absolutely. And I think that if you look at the national level, outpatient behavioral health spend has been growing 15 to 25% year over year since 2020. And talking to peers in the industry and peers that are in payer groups, they think that trend for behavioral health is going to continue at 10 to 20% for the foreseeable future. So this is gonna continue to rise.
One anecdotal story that I find fascinating is one of our partners at a regional payer in 2020, outpatient behavioral health made up about 50% of their total behavioral health spend. That spend grew since 2020 since 2020 to 2024. Now outpatient behavioral health makes about 75% of their behavioral health spend. So not only is the overall behavioral health pie getting bigger, the slice that is behavioral health is also getting much, much larger.
Speaker 0: This gap that you've just described, right, is tremendous. And and Charles also mentioned the understanding that how this has grown over the last couple of years and the match between access and demand, etcetera. When you're thinking about this gap, where do you see the biggest gap today between how health plans are approaching behavioral health and getting a handle on what they're actually spending?
Speaker 2: Yeah. That's such a great question. For me, the biggest gap is the lack of optimized care pathways for behavioral health. So if you look in physical health, we've seen significant progress steering patients towards the most effective and cost efficient interventions. There's all sorts of solutions for chronic conditions like cancer, cardiovascular disease, CKD, diabetes, but for some reason, behavioral health really hasn't caught up.
Outside of some high cost specialty care that has there's very limited systematic guidance directing individuals to the right level of care at the right time for behavioral health, which has led us to this significant overreliance on therapy. Therapy is very clinically effective at the individual level, but it really doesn't scale efficiently across an entire population. So I think the key to closing this gap is really improving the care pathways that are available to patients so payers are able to spend their behavioral health dollars more efficiently and effectively across the entire population.
Speaker 0: Now what you've just described brings me to my next point, which is the importance of a more integrated approach and being able to connect the dots a little bit better to what you've just described. And and, Charles, I I know that you've talked about this quite a bit, which is, again, creating a more integrated preventative approach to behavioral health in general. Can you walk us through what that looks like for health plans today and and why it's a better long term bet for payers specifically?
Speaker 1: Absolutely. I think for payers right now, the core question really boils down to, how do you meet, you know, these growing behavioral health needs within the broader population in a way that's both scalable as well as cost effective? And we think the answer is to borrow some concepts from how we manage, you know, chronic conditions in other parts of health care, which really is, a population health management and kind of integrated, approach. It starts really first with engagement. Right?
Early and and longitudinally, you wanna reach people before they hit a crisis and to stay with them over time. And that's where tools like meditation, mindfulness, sleep support, you know, play a a very critical role. But you parlay that engagement in the second piece, which is early detection, identifying when somebody might have needs for additional sorts of support and then navigating them into some sort of a personalized care model that has really clear pathways. Right? Active steerage and navigation into that sort of right care.
The third is what Charlie was describing. You know, optimizing the care model itself, ensuring that people are getting the right care at the right time. And importantly, we think about behavioral health oftentimes, you know, that outpatient care paradigm is oftentimes just weekly therapy, and in between sessions, there's not a lot going on. Headspace would argue that the weekly therapy or the episode of care can be significantly more effective, significantly, more timely if you're adding daily practices like journaling or other sorts of, you know, guided homework, if you will. And then finally, the piece that I think the system misses out on a lot is after the episode of care itself, the goal is actually more sustained well-being.
Right? How do you maintain that member in some sort of a a healthy stability through different sorts of daily habits while continuing to monitor and catch signs that might require additional interventions? But that sort of a stable wellness, you know, maintenance, if you will, is oftentimes a missing element of this broader kind of end to end model. None of this is necessarily rocket science. Right?
It's actually not that dissimilar to how, say, diabetes might be managed. But it's interesting that this type of model has not historically existed within behavioral health, but this is exactly what we've built at Headspace, and this is exactly what we're partnering with payers to deliver at scale.
Speaker 0: You've both touched on something very important here, which is, again, that the the model of therapy itself and what therapy looks like and how it's perceived is changing and needs to change. Again, to to be able to actually say again, we are improving downstream costs right now. I'd love to know as we close our conversation here today from both of you, what's that number one thing about what prevention behavioral health actually needs to look like today? Charles, I'll start off with you.
Speaker 1: Yeah. Thanks, Lucas. If if your listeners remember nothing else from from this discussion, I would I would remember that the idea of a population health management model is actually the key to unlocking the better, faster, more cost efficient relief, basically, for for the member. There really hasn't been a concept of preventative care within behavioral health since, you know, the very early days of of behavioral, which is why in general, you are seeing that therapy ends up being almost the the first line treatment within behavioral health. Again, given that, we're seeing these exploding rates of utilization without a commensurate offset in some of the higher levels of care, our very strong hypothesis that we're seeing in market and validating with with some of the return on investment numbers is that the battle's actually being won or lost at the intersection of this subclinical kind of prevention element with the actual smooth and seamless integration into the the care model itself.
And, again, at the end of the day, a a smooth ecosystem that can detect those needs, build trusted credible relationships with the member that allow the member to accept the serage from, you know, that that ecosystem versus, you know, oftentimes, I know payers sometimes struggle, right, with gaining that sort of of member credibility. I think that's really the linchpin to then getting to the right care, right time, right place in integrated care model sorts of fashions that are looking at both the therapy, but augmented sometimes with, say, coaching and behavior change, as well as, like, daily, you know, content work within within an app and then maintaining them in stable wellness. That for us is really how to take, you know, the goodness of a population health management approach into this, you know, very newly, I think, emerging challenge on on the cost side.
Speaker 2: Yeah. I just wanna piggyback a little bit on the prevention that Charles is talking about. I think if you look at physical health, we have so many tools to prevent physical health symptoms. We have the gym. There's all sorts of apps.
But I think for behavioral health, having that comprehensive tool that focuses on preventing mental health issues is very new. And I think getting members access to those tools readily available to them to prevent downstream mental health conditions is really new and is really exciting to be in. And I think that's our best way to prevent them is, like, getting members access to better tooling to try to reduce these overall downstream impacts for a mental health condition.
Speaker 0: As you've both outlined, what it does is it creates a more proactive approach than being reactive all the time, which certainly then trickles down, and it helps members. It helps improve behavioral health outcomes, which is so crucial. Charles and Charlie, thank you so much for your time and insights today. It's great to have you on. Thanks for being here.
Speaker 2: Lucas, thank you so much.
Speaker 0: We also want to thank our podcast sponsor, Headspace, for bringing us together, and you could connect with Headspace in person at Booth 33063306 during Becker's spring payer issues roundtable in Chicago, April the fourteenth. We certainly hope to see you there and that you stop by. You could tune into more podcasts from Becker's Healthcare by visiting our podcast page at beckershospitalreview.com.
I'm excited to have them. Charles Phan, he's the president of Headspace, and Charlie Andres, he's the lead actuary at Headspace. Charles and Charlie, thanks so much for being here today. It's great to have you.
Speaker 1: Absolutely, Lucas. Thanks for having us. Thrilled to be here.
Speaker 2: Yeah. Super excited to be here.
Speaker 0: I wanna hop right into the conversation, but for those that might not know you yet, I do wanna start us off with a little bit of an introduction to who you are, what you do, who health Headspace is, and and your work in health care. Charles, I'll start off with you.
Speaker 1: Yeah. Thanks, Lucas. As you described, I'm the president of Headspace. I've spent nearly three decades in health care as a care provider, a consultant, and a business leader with the last decade or so, being in behavioral health. But I actually started my career in consumer products.
And since then, I've been bringing the consumerism kind of mindset into population health and value based care types of of models. You know, largely, my work is using this consumerism lens to drive better patient outcomes at scale through greater engagement, improved outcomes, you know, making the overall care model work better at scale.
Speaker 0: I'm excited to talk about that today. It's certainly one of the big trends in health care is the consumer aspect. Excited to have you. Charlie, over to you.
Speaker 2: Awesome. Yeah. So my name is Charlie Andrus. I lead our actuarial practice here at Headspace. Actuarial encompasses all things risk, ROI, and pricing.
I've worked as an actuary specifically in digital health for the last five years, wearing all sorts of hats that's required at a smaller company while maturing their actuarial practices as well. Prior to the jump to digital health, I worked in actuarial consulting, where I really specialize in the intersection between data science and actuarial work. So I've been really fortunate to see lots of different parts of the industry, and I've always been always leaning to the more innovative innovative side of health care and actuarial work. And so the time in Headspace has just been super interesting and super special to me, and I'm so psyched to hear to talk to you guys.
Speaker 0: Yeah. I'm excited to have you as well. This is gonna bring an exciting lens to the conversation too. I wanna start us off with level setting the conversation a little bit too and talk a little bit about the spending that's been going on in behavioral health. Again, it's been more than tripled over the past two decades.
There's been a lot of talk about that here in health care. And, again, it also continues to climb 2026 into 2027 and certainly beyond. How is the outpatient therapy system contributing to these rising costs? Charles, we'd love to start off with your perspective here.
Speaker 1: Yeah. Thanks, Lucas. I would say that, to your point, you know, the behavioral health spending in the aggregate has tripled over the past two decades, but I would argue that, there's really an era of kind of before, say, 2020 and then after 2020. You know, a decade ago and and earlier, the industry's challenges were largely all about access to care. Right?
In some regards, we were almost just, like, begging for more outpatient therapy, But it was constrained on both the demand side as well as the the supply side. On the demand side by consumer stigma and on the supply side by provider supply. And in many ways, you know, in the past, you know, since 2020 or so, we've actually seen a lot of these barriers actually have been now meaningfully addressed within The United States. You know, there's been a lot of anti stigma efforts on the demand side. We've had a lot of very access friendly or pro access regulations.
And then there's been a substantial increase in just the availability of the provider base, especially through virtual care models. But while we're celebrating this, I think we're also now somewhat facing the opposite problem, which is how to ensure the right care at the right time. As you cited, you know, behavioral health cost continues to rise at levels that are, like, multiples of overall medical cost, inflation. That behavioral health is is more than double right now. But what's different is in this latest era, the majority of this behavioral health spend is not coming from inpatient or emergency room use.
It's actually being driven by outpatient therapy utilization. So today, we're at roughly $60,000,000,000 of outpatient behavioral health therapy that's being delivered in The United States. You would expect, right, if this were primary care, when we're thinking about primary care versus specialty care, you would expect that had primary care doubled, you would see a reduction in inpatient bed days and ER usage. What's really interesting about this behavioral health trend is we're not seeing that. We literally doubled the amount of therapy, but inpatient bed days remain relatively flat to slightly increasing, and ER usage is doing that as well, which really starts to beg some questions on, you know, how do we make sure we're getting actually right care, right time?
The other kind of conundrum for the payers is that because of a lot of the regulation that I was describing, right, things like the mental health parity act and things like that, there is actually very little ability for your classic payer to deploy, their utilization management or their medical necessity sorts of of requirements, which means, you know, in short, we've got almost like a tiger by the tail here. There's rapidly increasing outpatient trend, And it's not just outpatient trends contributing to behavioral trend. It almost is the trend in many respects.
Speaker 0: Charlie, Charles outlined this in a in a fantastic way in terms of what this means in an old from an overall perspective and what this looks like in The United States. What does this look like from an actuarial perspective? Right? How are you seeing these contributors making a difference to these rising costs?
Speaker 2: Yeah. Absolutely. And I think that if you look at the national level, outpatient behavioral health spend has been growing 15 to 25% year over year since 2020. And talking to peers in the industry and peers that are in payer groups, they think that trend for behavioral health is going to continue at 10 to 20% for the foreseeable future. So this is gonna continue to rise.
One anecdotal story that I find fascinating is one of our partners at a regional payer in 2020, outpatient behavioral health made up about 50% of their total behavioral health spend. That spend grew since 2020 since 2020 to 2024. Now outpatient behavioral health makes about 75% of their behavioral health spend. So not only is the overall behavioral health pie getting bigger, the slice that is behavioral health is also getting much, much larger.
Speaker 0: This gap that you've just described, right, is tremendous. And and Charles also mentioned the understanding that how this has grown over the last couple of years and the match between access and demand, etcetera. When you're thinking about this gap, where do you see the biggest gap today between how health plans are approaching behavioral health and getting a handle on what they're actually spending?
Speaker 2: Yeah. That's such a great question. For me, the biggest gap is the lack of optimized care pathways for behavioral health. So if you look in physical health, we've seen significant progress steering patients towards the most effective and cost efficient interventions. There's all sorts of solutions for chronic conditions like cancer, cardiovascular disease, CKD, diabetes, but for some reason, behavioral health really hasn't caught up.
Outside of some high cost specialty care that has there's very limited systematic guidance directing individuals to the right level of care at the right time for behavioral health, which has led us to this significant overreliance on therapy. Therapy is very clinically effective at the individual level, but it really doesn't scale efficiently across an entire population. So I think the key to closing this gap is really improving the care pathways that are available to patients so payers are able to spend their behavioral health dollars more efficiently and effectively across the entire population.
Speaker 0: Now what you've just described brings me to my next point, which is the importance of a more integrated approach and being able to connect the dots a little bit better to what you've just described. And and, Charles, I I know that you've talked about this quite a bit, which is, again, creating a more integrated preventative approach to behavioral health in general. Can you walk us through what that looks like for health plans today and and why it's a better long term bet for payers specifically?
Speaker 1: Absolutely. I think for payers right now, the core question really boils down to, how do you meet, you know, these growing behavioral health needs within the broader population in a way that's both scalable as well as cost effective? And we think the answer is to borrow some concepts from how we manage, you know, chronic conditions in other parts of health care, which really is, a population health management and kind of integrated, approach. It starts really first with engagement. Right?
Early and and longitudinally, you wanna reach people before they hit a crisis and to stay with them over time. And that's where tools like meditation, mindfulness, sleep support, you know, play a a very critical role. But you parlay that engagement in the second piece, which is early detection, identifying when somebody might have needs for additional sorts of support and then navigating them into some sort of a personalized care model that has really clear pathways. Right? Active steerage and navigation into that sort of right care.
The third is what Charlie was describing. You know, optimizing the care model itself, ensuring that people are getting the right care at the right time. And importantly, we think about behavioral health oftentimes, you know, that outpatient care paradigm is oftentimes just weekly therapy, and in between sessions, there's not a lot going on. Headspace would argue that the weekly therapy or the episode of care can be significantly more effective, significantly, more timely if you're adding daily practices like journaling or other sorts of, you know, guided homework, if you will. And then finally, the piece that I think the system misses out on a lot is after the episode of care itself, the goal is actually more sustained well-being.
Right? How do you maintain that member in some sort of a a healthy stability through different sorts of daily habits while continuing to monitor and catch signs that might require additional interventions? But that sort of a stable wellness, you know, maintenance, if you will, is oftentimes a missing element of this broader kind of end to end model. None of this is necessarily rocket science. Right?
It's actually not that dissimilar to how, say, diabetes might be managed. But it's interesting that this type of model has not historically existed within behavioral health, but this is exactly what we've built at Headspace, and this is exactly what we're partnering with payers to deliver at scale.
Speaker 0: You've both touched on something very important here, which is, again, that the the model of therapy itself and what therapy looks like and how it's perceived is changing and needs to change. Again, to to be able to actually say again, we are improving downstream costs right now. I'd love to know as we close our conversation here today from both of you, what's that number one thing about what prevention behavioral health actually needs to look like today? Charles, I'll start off with you.
Speaker 1: Yeah. Thanks, Lucas. If if your listeners remember nothing else from from this discussion, I would I would remember that the idea of a population health management model is actually the key to unlocking the better, faster, more cost efficient relief, basically, for for the member. There really hasn't been a concept of preventative care within behavioral health since, you know, the very early days of of behavioral, which is why in general, you are seeing that therapy ends up being almost the the first line treatment within behavioral health. Again, given that, we're seeing these exploding rates of utilization without a commensurate offset in some of the higher levels of care, our very strong hypothesis that we're seeing in market and validating with with some of the return on investment numbers is that the battle's actually being won or lost at the intersection of this subclinical kind of prevention element with the actual smooth and seamless integration into the the care model itself.
And, again, at the end of the day, a a smooth ecosystem that can detect those needs, build trusted credible relationships with the member that allow the member to accept the serage from, you know, that that ecosystem versus, you know, oftentimes, I know payers sometimes struggle, right, with gaining that sort of of member credibility. I think that's really the linchpin to then getting to the right care, right time, right place in integrated care model sorts of fashions that are looking at both the therapy, but augmented sometimes with, say, coaching and behavior change, as well as, like, daily, you know, content work within within an app and then maintaining them in stable wellness. That for us is really how to take, you know, the goodness of a population health management approach into this, you know, very newly, I think, emerging challenge on on the cost side.
Speaker 2: Yeah. I just wanna piggyback a little bit on the prevention that Charles is talking about. I think if you look at physical health, we have so many tools to prevent physical health symptoms. We have the gym. There's all sorts of apps.
But I think for behavioral health, having that comprehensive tool that focuses on preventing mental health issues is very new. And I think getting members access to those tools readily available to them to prevent downstream mental health conditions is really new and is really exciting to be in. And I think that's our best way to prevent them is, like, getting members access to better tooling to try to reduce these overall downstream impacts for a mental health condition.
Speaker 0: As you've both outlined, what it does is it creates a more proactive approach than being reactive all the time, which certainly then trickles down, and it helps members. It helps improve behavioral health outcomes, which is so crucial. Charles and Charlie, thank you so much for your time and insights today. It's great to have you on. Thanks for being here.
Speaker 2: Lucas, thank you so much.
Speaker 0: We also want to thank our podcast sponsor, Headspace, for bringing us together, and you could connect with Headspace in person at Booth 33063306 during Becker's spring payer issues roundtable in Chicago, April the fourteenth. We certainly hope to see you there and that you stop by. You could tune into more podcasts from Becker's Healthcare by visiting our podcast page at beckershospitalreview.com.
