Behavioral Health Provider Ideal Option’s Partnership with Safeway:
Reflections on an Entire Industry
On June 1st, “Ideal Option, a national leader in evidence-based medication-assisted treatment [announced that it had] partnered with Safeway, one of the largest grocery retailers in the U.S., to provide services to patients inside the store’s wellness center [in] Vancouver, WA”.
“With this partnership, Safeway becomes the first national retailer to complement their in-store pharmacy services with an addiction medicine provider – a bold and progressive move that reflects both a decrease in the stigma traditionally surrounding addiction, and the urgency to counter the surge in substance use during the pandemic”.
Every so often, we run into a company whose development is in many ways emblematic of the growth and evolution of an entire industry.
Well, such is the case with the Ideal Option and their recent partnership agreement.
Let’s start at, well, its start.
The Founding by Clinical Entrepreneurs. While we don’t know the inside details of the genesis of Ideal Option, a quick glance at their website indicates that the company was founded in 2012 by two physicians. Both board-certified in addiction and emergency medicine and on the front lines (and at the front end) of the opioid epidemic, they built a business to meet unmet needs in their community. Classic clinical entrepreneurship.
Capital from Private Equity. When you examine consolidation cycles in various industries, they are often driven by private equity. This is clearly the case in substance use disorder M&A. Based upon proprietary data collected and analyzed by The Braff Group, over the decade ended 2020, 60% of the deals completed in the space were completed by private equity. Perhaps then it is no surprise that the firm tapped into such capital in 2018, which, perhaps not so coincidentally, was the peak year in the number of PE sponsored deals, especially platform transactions like Ideal Option that serve as the foundation for further growth. What was unusual however was that according to PitchBook, the funding was a minority, vs. a majority investment, likely intended to fund growth rather than cashing out the principal shareholders.
Payors Getting into the Action. Over the past 10 plus years, we have seen an increasing number of payors investing in provider companies as part of a strategy to reduce costs by coordinating care. Companies like United Health and Humana have invested billions in such a strategy. At the same time, payors have also created investment pools to fund earlier stage development. And Ideal Option was in the thick of it once again, receiving another minority investment from Blue Venture Fund, the corporate venture arm of the Blue Cross and Blue Shield Association (source: PitchBook).
Medicaid Embracing Medication-Assisted Treatment. The Braff Group has written extensively on why payors are increasingly seeing MAT as a favored treatment option. Philosophical discussions regarding MAT vs. abstinence-only programs notwithstanding, there’s no arguing the efficacy of MAT in terms of cost and recidivism (in this case, the lack thereof). And like johnny on the spot, Ideal Option threw both arms around this payor strategy, with Medicaid accounting for 75% of its patient base.
Cutting Edge vs. Bleeding Edge. It’s not all rainbows and kittens in health care investing. At the same time, Ideal Option was launching in 2012, the now disgraced Theranos was literally on the bleeding edge of lab testing. Claiming to be able to run dozens of tests on a single droplet of blood, the company partnered with the likes of Walgreens and Safeway (which went all-in with an investment of $350M) to develop space within their stores to offer this astonishing technology. Turns out that the operative word was astonishing, as it was a complete fabrication, costing investors billions and leaving Walgreens and Safeway, among others, with unused space.
Behavioral Health Care Becomes De-Stigmatized. With the opioid epidemic putting addiction front and center in various media outlets and the Affordable Care Act mandating that behavioral health services be covered on par with medical benefits, behavioral health has gone mainstream and public opinion towards those suffering from addiction and other mental health disorders has softened and become more empathetic. Not only has this encouraged more patients to seek out care, it has begun to challenge the long-held NIMBY problem – the efforts by local communities to locate providers anywhere but not in my backyard.
With this final development, the partnership between Ideal Option and Safeway was arguably the next step in the progression of everything that preceded it.
- With the added stressors brought on by the pandemic, the demand for substance abuse treatment is enormous – and growing.
- If ever there was a time to consider locating a clinic in a highly visible venue, this is it.
- As a result of Theranos, Safeway has unused floor space that it needs to fill.
- Safeway stores are located predominately in states that have embraced Medicaid expansion, leveraging Ideal Option’s payor focus.
So, if you think about it, it was an ideal option for Ideal Option.
And perhaps a harbinger of new thinking regarding where behavioral health can be delivered.