Policy continues to lag behind public awareness in most countries, but changes in legislation are also apparent. In the UK, mental health provision featured prominently in the last NHS Long-Term Plan, which committed to growing mental health funding faster than the NHS budget as a whole. EU policy is also evolving. The Joint Action for Mental Health and Well-being, launched in 2013, aims to build a framework for action in mental health policy at the European level, and has added impetus to the shift from institutional to community-based care provision.

In part, these changes are a recognition of the enormous economic costs of mental illness. The OECD estimates total costs at more than 4% of GDP (over €600 billion) across the 28 EU countries, once social security programmes and lower productivity are added to the direct costs of providing care.

Strong funding support and dynamic change are typically ingredients for success in healthcare investing, so the sector is likely to attract fresh capital in the coming years. These trends are likely to open up a range of opportunities for investors. In this edition of our Global Healthcare Quarterly, DC Advisory’s global healthcare team explores:

  • Residential & community-based care
  • Technology driven support (including apps)
  • The cross-border perspective on mental health care models

Residential & Community-based care

Most obviously, providers of residential and community-based mental health care will appeal to investors, particularly given the fragmentation evident in most European markets. Private equity investors already have several successful case studies to follow, and more recently, infrastructure investors have been drawn to the sector, including iCON Infrastructure, which in 2018 acquired the UK residential care and supported living provider Choice Care, advised by DC Advisory.

In this segment, investors can look to the resilient funding, under-served demand and fragmented supply that is evident in most areas of specialist care. An additional source of growth, however, has come from a marked shift away from hospital inpatient care – The King’s Fund has calculated that NHS England has reduced overnight mental health beds by 72% from 1987 to 2017[1]. As hospitals focus resources on the highest-need patients, residential and community providers are stepping in to meet demand.

[1] The King’s Fund, “Hospital bed numbers – can the downward trend continue?” September 2017

Technology-driven support

Less familiar avenues are also opening up, as the need for improved mental health outcomes coincides with advances in technology and social media. Recent years have seen the launch of several apps targeting the market, addressing a wide spectrum from high-risk mental health interventions to lower acuity wellbeing solutions. Tomo, for example, is a behavioural change tool which aims to manage depression and prevent relapse, but can also help to address linked conditions such as diabetes or chronic pain conditions.

Elsewhere, XenZone’s Kooth platform allows 11-19 year-old users to interact safely and positively online with support workers and each other, creating a potentially transformative means for the UK NHS to provide early interventions and prevent the escalation of mental health conditions.

Cross-border perspective

While mental health conditions may be borderless, common care models have been slow to emerge, reflecting the wide variations in regional and national funding and delivery systems, as well as differing cultural attitudes to mental health. In India, for example, significant social stigma means mental health investment is in its infancy, with a revised Mental Healthcare Act only formally passed last year.

As the leaders in the sector seek further scale, these differences may present obstacles to international M&A. But cross-border consolidation is already underway, perhaps most notably between the US and the UK, where UHS has followed its investment in Cygnet Health Care with a series of further acquisitions.

The medium-term, then, is likely to see a continued pattern of localised delivery models, perhaps with more cross-border ownership as national champions seek to open up new growth avenues. Where borders may be blurred sooner is in the area of digital delivery platforms, which by their nature are applicable and deliverable globally.

Conclusion

Mental health is clearly an area of growing importance for fast-changing societies, and looks set to be no less important for investors. To capitalise on these opportunities, sector operators and investors should look, as ever, to emerging technologies and developments in social media for clues to how those in need may want to receive support. Just as importantly, investors should be awake to the changing discourse around mental health, which points the way towards what good quality care will need to look like in the future.

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Global healthcare contacts

Tosh Kojima, Asia
T: +44 20 7856 0904
E: Tosh.Kojima@dcadvisory.com

Frédéric Meyer, France
T: +33 1 42 12 49 38
E: Frederic.Meyer@dcadvisory.com

Wolfgang Kazmierowski, Germany
T: +49 171 616 0422
E: Wolfgang.Kazmierowski@dcadvisory.com

Martin Moser, Germany
T: +49 171 616 9789
E: Martin.Moser@dcadvisory.com

Prashant Jain, India
T: +91 80 6816 4713
E: Prashant.Jain@dcadvisory.in

Tomasz Pietrusinski, Poland
T: +48 22 46002 06
E: Tomasz.Pietrusinski@dcadvisory.com

Joaquín Gonzalo, Spain
T: +91 524 11 24
E: Joaquin.Gonzalo@dcadvisory.com

David Sanders, UK
T: +44 20 7856 0987
E: David.Sanders@dcadvisory.com

Mark Chiang, USA
T: +1 (917) 621-3753
E: Mark.Chiang@dcadvisory.com