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Defend Public Education NOW

Defend Public Education NOW

Defend Public Education NOW is a group of activists dedicated to protecting & furthering democratically governed, teacher-student centered public education

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The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth

pestakeholder.org/wp-content/uploads/2022/02/PESP_Youth_BH_Report_2022.pdf

Key Points

• Private equity firms are increasingly investing in behavioral services for children and adolescents, including services for youth with intellectual and developmental disabilities, services for youth in foster care, services for youth in the juvenile justice system, troubled teen programs, and autism services.

• Private equity has a troubling track record in investing in youth behavioral services. The private equity business model, which focuses on outsized returns over short time horizons, may prioritize profit over the well-being of children. Cost-cutting tactics at private-equity-owned youth behavioral companies, such as cutting staff, relying on unlicensed staff, and failing to maintain facilities, can lead to abuse, neglect, and unsafe living conditions for youth under the care of those companies.

• Despite horrific conditions at some youth behavioral health companies, their private equity owners have in some cases reaped massive profits. • This report examines several key areas of youth behavioral services: o Companies in the troubled teen industry (TTI), including Aspen Education Group owned by Bain Capital; and Family Help & Wellness owned by Trinity Hunt Partners.


For-profit foster care companies, including the Mentor Network owned by Centerbridge Partners; and Sequel Youth & Family Services owned by Altamont Capital. o Services for youth with intellectual and developmental disabilities (I/ DD), including AdvoServ (aka Bellwether Behavioral Health) owned by GI Partners and later by Wellspring Capital Management. o Autism services companies, which have been increasingly bought up by private equity firms in the last several years.

• Appendix A includes a list of youth behavioral services companies owned by private equity firms as of December 2021. Private equity firms are increasingly investing in companies specializing in behavioral services for children and adolescents. This includes services for youth with intellectual and developmental disabilities; services for youth in foster care; services for youth in the juvenile justice system; troubled teen programs; and autism services.1

Behavioral health services for youth are largely privatized. Non-profit organizations operate most facilities, but increasingly for-profit companies, including companies owned by private equity firms, make up a significant share of providers.

For-profit youth behavioral health facilities and for-profit foster care have garnered criticism from youth justice and disability rights advocates. In residential facilities, criticism has included:

• Inadequate counseling or education services;
• Physical, sexual, and emotional abuse;
• Forced isolation; • Use of physical and chemical restraints;
• Squalid living conditions. In privatized foster care companies, concerns include:
• Inadequate screening of foster parents,
• Increasing workloads for social workers and high social worker turnover,
• Filling beds using a quota system, and
• Relying on unlicensed workers.2

The private equity business model may exacerbate these problems. Private equity firms often aim to double or triple their investment over 4-7 years. The pursuit of these outsized return expectations over relatively short time horizons can lead to cost-cutting that hurts care. In addition, use of high levels of debt can divert cash from operations to interest payments and dividends paid out to private equity owners
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