The Kids Are Not Alright
How Private Equity Profits Off of Behavioral Services for Vulnerable and At-Risk Youth
Private Equity Stakeholder Project
Private Equity is when a company’s stock is not available to the general public or listed on the stock exchange. The stock is sold directly to specific investors.
“This report examines several key areas of youth behavioral services:
- 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.
- 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.
- Autism services companies, which have been increasingly bought up by private equity firms in the last several years” p. 3
There has been a growing trend of private equity firms investing in TTI programs and other companies that provide services for intellectually/developmentally disabled kids, kids in foster care, kids who are in trouble with the law, and autistic kids p. 3
Criticisms of residential facilities include: poor quality education, harmful or inadequate mental health services, use of isolation and restraints, abuse (physical, emotional, sexual), and unsanitary living conditions p. 3
Criticisms of privatized foster care companies include: not enough screening for foster parents, social workers have too much on their plates and are prone to quitting, staff are often unqualified, and there are quotas for enrollment of kids p. 3
“Private equity firms often aim to double or triple their investment over 4-7 years” p. 3
It is not possible to meet that goal while providing good quality care and environments for kids
Cost cutting tactics:
“Reducing staffing • Failing to provide adequate training • Underpaying employees, resulting in high-turnover and understaffing • Failing to hire employees with adequate licensing (which can be more costly) • Cutting services (e.g., therapy or educational services) • Failing to maintain facilities, leading to unsafe or filthy living conditions” p. 4
Alaris Royalty reported $71mil in profits from Sequel, a 23% annual return p. 4
When Bain acquired Aspen, revenue nearly doubled.
Program staff complained that they weren’t getting enough staffing hours and other expenses, like drug tests, were being cut back on, leading to citations from the California Department of Human Services p. 7
Bain sold Aspen to Acadia Healthcare in 2015 p. 7
Aspen has ties to Family Help & Wellness: shared executive staff (Tim Dupell) and many closed Aspen programs were acquired and re-opened by Family Help & Wellness p. 8
“A 2020 investigation by NPR Utah found that calls to local police increased 40% after the facility reopened under Family Help & Wellness as Elevations, and the rate of calls related to abuse, sex offenses, or suicide increased even more.” p. 8
“Inspection reports for Elevations from 2015 through 2019 showed 35 violations, including missing documentation for staff training and seclusion methods, not enough food, and repeated citations for mold in the bathrooms” p. 9
Solstice East (a FHW program) was investigated by North Carolina DHHS every year from 2018-2021, found serious issues every time p. 9
Equinox, another FHW program has also received many citations from North Carolina DHHS p. 9
Mentor Network/Sevita Health provides foster care and residential programs for kids and adults, serious widespread abuse has been reported companywide p. 10
At least 86 children died in Mentor’s custody in the 10 year period between 2005 and 2014 p. 11
“Mentor’s death rate among foster children is 42% higher than the national average” p. 11
“Altamont Capital Partners Operating Partner Jerry Rhodes serves on Sequel’s board of directors. Rhodes previously served as COO and then CEO for CRC Health, a Bain Capital-backed behavioral health company that owned Aspen Education Group” p. 13
In 2020, Sequel youth counselors were given a starting wage of $12/hr p. 14
TRIGGER WARNING: descriptions of physical abuse and neglect, sexual abuse, descriptions and photos of substandard living conditions, child death pp. 14-15
California’s investigation into Sequel led them to pass a law banning juvenile offenders and foster care children from being sent to facilities out of state p. 17
TRIGGER WARNING: child death p. 18
AdvoServ was sued by the Maryland Attorney General’s Office in 2019 for failing to properly care for children, even though Maryland was paying $230k per child annually pp. 18-19
Children at AdvoServ missed hundreds of doses of medications due to staff incompetence p. 19
Trigger warning: photo and description of squalid living conditions p. 19
“Despite horrific conditions at some youth behavioral health companies, their private equity owners have in some cases reaped massive profits” p. 21
Programs Mentioned:
The Mentor Network aka Sevita Health pp. 4,9-12
Sequel Youth & Family Services p. 4, 12
Aspen Education Group p. 6
Ascent Behavioral Health p. 6
Innercept p. 6
Mount Bachelor Academy p. 7
SageWalk Wilderness School p. 7
Broadstep Behavioral Health p. 8, 18
Family Help & Wellness p. 8
Island View RTC p. 8
Solstice East p. 9
Sequel Courtland p. 14
Northern Illinois Academy p. 14, 17
Clarinda Academy pp. 14-15, 17
Lakeside Academy pp. 15, 17
Sequel Pomegranate pp. 15, 17
Kingston Academy pp. 15, 17
Red Rock Canyon School p. 15
Normative Services Inc pp. 16-17
Bernalillo Academy p. 17
Auldern Academy p. 17
Starr Albion Prep p. 17
Sequel TSI Madison p. 17
Union Juvenile Residential Facility p. 17
Riverside Academy p. 17
AdvoServ/Bellwether Behavioral Health p. 18
Carlton Palms Educational Center p. 20
Firms Mentioned:
Bain Capital pp. 6-8, 18
Centerbridge Capital p. 4
The Vistria Group p. 4
Alaris Royalty p. 4, 12
Cimarron Healthcare Capital p. 6
Veronis Suhler Stevenson (VSS) p. 6
Pine Tree Equity p. 6
Onex Partners p. 6
Sprout Group p. 6
Frazier Healthcare p. 6
Warburg Pincus p. 6
Trinity Hunt Partners p. 8
Vestar Capital p. 10
Madison Dearborn Capital Partners p. 10
Windrose Health Investors p. 10
Centerbridge Partners p. 10
Magellan Health Services p. 10
Altamont Capital Partners p. 12-13
Patriot Capital p. 13
Levine Leichtman Capital Partners p. 13
GI Partners p. 18
Wellspring Capital Management p. 18