This is an exclusive BHB+ article.
Spending in the autism services sector has exploded over the past decade. That’s particularly true for applied behavior analysis (ABA) therapy.
State Medicaid programs and commercial payers alike are now putting the services under a microscope and trying to find ways to curb the spend. Some payers, such as Centene, are even setting up working groups focused on reducing ABA spending.
This comes as federal audits have found that at least four states have had systemic failures in overseeing autism provider compliance and spending. And I would bet more issues will emerge as the audits continue across more states.
But that’s not the only negative headline the industry has recently faced. The Wall Street Journal recently reported on questionable billing practices at Indiana-based provider Piece by Piece, which was allegedly charging $640 per hour for ABA services. Stories such as this have called into question the guardrails and regulations currently in place to prevent fraud, waste and abuse.
We’ve already seen several state Medicaid programs slash rates and impose a lifetime cap on ABA hours, and this is likely just the beginning as states find ways to reduce spending.
These cuts could jeopardize the survival of providers with large Medicaid populations, potentially creating service shortages for these populations.
All together, this doesn’t paint a rosy picture for the autism industry. At the same time, it’s important for providers and their investors to really have a hard look in the mirror and evaluate how we got here. For example, a number of sources have told me about the lack of standardization regarding the number of hours of ABA prescribed.
In this BHB+ Update, I will explore
– The implications behind the recent headlines
– How payers are responding to increasing expenditures
– Which autism-industry assets could still be safe bets for investors
Four audits and a funeral
The Office of the Inspector General for HHS has released four reports examining state oversight of Medicaid billing and documentation compliance for ABA services. In all four audits, the OIG found issues, including at least one improper or potentially improper payment.
“Yes, it’s of concern for the fiscal integrity, but it’s also of concern for the quality of care that these children may be receiving,” OIG Assistant Regional Inspector General Kim Kennedy told BHB. “The documentation was so poor or so limited you couldn’t distinguish between the good providers, the bad providers, or the fraudulent providers, per se.”
While these reports did find issues with compliance, it’s important to note that the audits were not focused on finding fraud; rather the watchdog efforts focused on detecting questionable billing practices and a massive expansion of spending on new benefits, which are signals of structural weaknesses that can create an environment for fraud, waste and abuse.
I would see this as a warning sign for providers to clean up their act and cross their t’s and dot their i’s when it comes to compliance, or work with an external organization that can help them get their practices up to snuff.
But that wasn’t the only sore spot for ABA providers recently. Following the WSJ’s exposé of the billing practices at Piece by Piece, Indiana Family and Social Services Administration terminated its provider agreements and banned it from billing its state Medicaid program following an investigation. Just weeks after news broke that Piece by Piece would shut down and be taken over by Applied Behavior Center for Autism.
Payers clamp down
Even before the negative headlines emerged, payers and state Medicaid plans were looking at ways to control ABA and autism services spending.
And now we have examples of states taking action. Indiana Medicaid rolled out new ABA rate cuts and a lifetime cap on hours. Indiana Medicaid was once one of the more generous reimbursement plans for providers, but before setting fixed rates in 2023, the state reimbursed 40% of what it was billed.
Indiana also mandated that all autism therapy providers be accredited by the Council of Autism Service Providers starting in October 2027. This isn’t the first state to impose accreditation. Massachusetts is now requiring accreditation for autism providers working with state Medicaid programs.
I think this type of accreditation could benefit both providers and payers. For providers, it’s a way to demonstrate they are employing qualified professionals, and for payers, it’s one way to ensure the quality of care.
But cuts are not just happening at the state level. Earlier this week, CareSource Georgia sent a letter announcing that providers will be reimbursed at 80% of the current Georgia Medicaid fee schedule starting in early May.
“We recently notified certain providers in our Georgia network of adjustments to reimbursement for applied behavior analysis therapy services,” a CareSource spokesperson told me yesterday. “These updates align with actions being taken by Medicaid programs nationwide to responsibly manage public resources as demand for these services grows. We remain committed to ensuring members have access to the essential services they need.”
While care plans, like CareSource, aim to control spend, some say these large cuts could make running an ABA business unsustainable. With a tight labor market, margins are thin and there are not a lot of options for where to make cuts.
“Georgia just increased their rate in 2025 for ABA services,” Brett Blevins, a serial entrepreneur in the behavioral health space and former CEO of Commonwealth ABA, told me. “So this is probably very surprising to most providers, and there’s really no way to be prepared for a 20% rate cut, because the wage market in the environment of ABA in Georgia is pretty well established. So to get a 20% rate cut, the only way to survive is to drastically cut salaries and wages for folks.”
A reckoning
In a perfect world, children (and even adults) are granted all medically necessary support and services with full coverage.
But in the world we are in, it doesn’t surprise me that an industry that is prescribing children up to 40 hours a week of ABA, sometimes for years on end, is coming up against some scrutiny. Additionally, the industry is still hammering out universal outcomes. This could leave payers asking: What am I paying for?
Yet standardizing hours remains largely unpopular among providers. Early results from Behavioral Health Business’ ongoing survey of autism providers indicate that industry professionals strongly agree: The number of ABA hours prescribed varies significantly by client need and should be determined on an individual basis. (Take the survey here – the first 10 respondents receive a free ticket to AIS West, and the next 50 can receive a heavily discounted ticket.)
If providers remain opposed to standardizing hours, the only other avenue would be standardizing outcomes.
“Outcomes are far harder to standardize and measure than hours. But maintaining the status quo only incentivizes the quest for billable hours that now threatens the industry’s ability to optimally serve families,” Jeff Beck, CEO of AnswersNow, wrote in a BHB Executive Forum.
Richmond, Virginia-based AnswersNow is a virtual provider that connects families directly with board-certified behavior analysts (BCBAs) for one-on-one therapy sessions and focuses on a parent-mediated therapy model.
“By centering care and reimbursement around these more meaningful measures of impact, we can better tailor therapy, right-size hours, and shift from a vicious cycle to a more sustainable, outcomes-driven model,” Beck wrote in the Executive Forum.
But it may not just be payers cooling on ABA services; investors like certainty, and all the forces at play in the industry right now may have some investors waiting to see how reimbursement pans out before jumping in.
In fact, one M&A expert recently told my colleague that in the Brazilian steakhouse of behavioral health investing, some investors are already flipping their “ABA dining token” to red.
Although, to some extent, investors have played a role in market dynamics as well, with many of the largest providers in the country having PE backing. According to a recent JAMA study, private equity firms have acquired 574 autism therapy centers across 42 states. The research also found that PE investment flowed into states with higher autism rates or insurance rates.
With the number of hours and rates under scrutiny, some research I would love to commission: average hours prescribed by PE-backed clinics vs. other providers and rates at PE-backed vs. non-PE-backed providers. It could help clear PE’s name or start to answer some questions.
If I had a million dollars
The need for autism services is undeniable. The rate of children diagnosed continues to increase yearly.
If I were an investor, which I am not, and limited partners gave me millions to invest, which they will not, I would take a closer look at allied autism services, such as occupational therapy and speech therapy.
These services are tried and require fewer hours with a master’s-level clinician. This is markedly different from ABA, where a registered behavior technician (RBT), without an advanced degree, spends high amounts of contact time with a learner.
Still, it’s not an either-or situation for a learner with autism. Most are getting both ABA and speech and OT services. From a business perspective, I suspect we will see less volatility in this space as I rarely see it mentioned as a main factor driving up Medicaid spending in any given state.
Another interesting take on this is AnswersNow’s approach, where learners are getting more time with a master’s-level BCBA but fewer overall hours compared with traditional ABA services.
Going forward, diversification of services is key.