How does LifeStance Health make money?

LifeStance makes money on a per-visit basis when a patient receives care from one of its clinicians

One of the more interesting subsets of the rise of telehealth since COVID started has been the explosion in teletherapy: the American Psychiatric Association found that while only 2% of their surveyed clinician members had been conducting the majority of their sessions virtually before COVID, that number that went up to 85% by May of 2020.

Of course, that was due to extenuating circumstances, with lockdowns and other conditions that made going out to an in-person appointment difficult, if not impossible. The reality is that, once things fully go back to normal, it's likely that many people will return to in-person care, but at least some portion of visits, probably a significant one, will still be done via phone, chat, text, or video. The future of therapy is most likely to be a hybrid model, with some sessions done in-person and others done remotely, depending on the individual and their needs.

There are a number of companies already taking that approach, including Two Chairs and Octave, but the most successful so far is LifeStance Health, which had its IPO in June.

The company offers services such as adult psychiatry, child and adolescent psychiatry, child and adolescent therapy, couples therapy, neuropsychological testing, TMS, group therapy, cognitive behavioral therapy, and medication management, both in person and via video telehealth.   

"We are dedicated to improving the lives of our patients by reimagining mental health through a disruptive, tech-enabled in-person and virtual care delivery model built to expand access and affordability, improve outcomes and lower overall health care costs," the company wrote in its S-1 filing with the SEC.

"We combine a personalized, digitally-powered patient experience with differentiated clinical capabilities and in-network insurance relationships to fundamentally transform patient access to mental health treatment. By revolutionizing the way mental health care is delivered, we believe we have an opportunity to improve the lives and health of millions of individuals."

The company has over 300 clinics across 31 states, including in Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nevada New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, and Wisconsin. It also has plans to enter Rhode Island and Michigan soon.

LifeStance earns its revenue on a per-visit basis when a patient receives care from one of its roughly 4,000 clinicians. Depending on the state, its clinicians are either employed directly through its subsidiaries or through its affiliated practices, for which we manage day-to-day operations pursuant to long-term management services contracts. 

The vast majority of its revenue comes from in-network insurance coverage: in the first quarter of 2021, the company made $128 million from commercial in-network payors, or 90% of its total $143 million in revenue. Another $5.7 million, or 4%, came from government payors, while 7.8 million, or 5% came from patients on a self-pay basis. 

The company also made 1.3 million, or 1% of revenue, from what it calls "nonpatient services."

"Total revenue consists primarily of consideration we expect to be entitled to in exchange for all patient activities. We bill each patient or third-party payor on a fee-for-service basis as medical services are rendered. Revenue is recognized as performance obligations are satisfied. Performance obligations are determined based on the nature of the services provided, and generally each individual counselling session is a performance obligation," the company wrote.

LifeStance currently had relationships with over 200 third-party payors, including Aeta, Humana, Optum, Cigna, and Kaiser.

The company saw major growth in 2020, with patient visits increasing 69% from 1,353,285 in 2019, and to 2,290,728 in 2020. Accordingly, its number of total centers increased from 170 to 370, while its employed clinicians increased more than doubled from 1,404 to 3,097.

The company raised $720 million in its IPO, and is now trading at $12.01 a share, with a market cap of $4.5 billion.

(Image source: summitpartners.com)