This is an exclusive BHB+ story.
Behavioral health expansion is often driven by markets with favorable reimbursement rates. That’s a key reason mental health service deserts persist in less populated areas.
Funding from private equity and venture capital firms could present a path to sustainable growth and access in these care deserts, but there are questions about investors’ role in bridging these gaps sustainably.
Private equity and venture capital dollars can generally take on more risk and act as a springboard to launching or broadening care in these areas. Yet industry insiders say investor capital can only be a real solution to bridging gaps in service deserts when it is strategically designed around specific, local community needs.
And that is frequently where VC and PE strategies fall short, they told Behavioral Health Business.
“If you’re going to build healthcare in rural settings, it has to be patient-focused and community-focused, or it’s just a setup for mistrust and problems,” Ben Robbins, general partner at GV (formerly Google Ventures), told BHB.
GV is a venture capital investment firm with several mental health companies in its portfolio, including Brightline, firsthand and Steadfast, among others.
According to Mental Health America, 65% of rural counties do not have a psychiatrist and 81% do not have a single psychiatric nurse practitioner. Individuals residing in these regions are often Medicaid beneficiaries who have higher rates of unmet behavioral health needs and lower health literacy. They face other barriers, too, such as transportation access, social isolation and lower socioeconomic status.
What’s more, rural Medicaid beneficiaries also tend to utilize far fewer mental health care services than urban Medicaid recipients.
The need for services is evident, yes. But Medicaid reimbursement rates are typically much lower than commercial pay, especially in rural areas, making it a challenge to operate sustainably for small or independent providers.
PE and venture capital funding can support expansion and scale, but that can come at a cost.
“We think that it’s a mistake to try a growth at all costs mindset in Medicaid. … We try to build fairly slowly in the beginning and make sure that we’re nailing it,” Robbins said. “We spend a lot of time trying to deeply understand who it is that we’re serving.”
GV is uniquely positioned because of its structure. The firm can be patient with the pace at which growth or scale occurs in the mental health companies it backs in rural markets. It is a luxury not enjoyed by most VC and PE firms under pressure for tight turnarounds and showing profit, Robbins explained.
“I agree with some of the perceptions about funding in this space; I just think that it’s not inherent to GV,” Robbins said. “You can use a VC platform to make a huge impact – if your focus is on the right things. It has to be that you’re focused on what you’re actually building and for whom, as opposed to: ‘How quickly can I exit this thing or flip it in some way?’”
PE vs. VC in service deserts
More than 60% of all deals in behavioral health since 2018 have occurred in the behavioral health sector, according to a 2024 report from The Braff Group. In some states, PE ownership of behavioral health services has skyrocketed so much that Colorado and North Carolina report around 25% of behavioral health facilities in each state are PE-owned.
When private equity enters the picture in healthcare, depending on the pressure a firm might be under to turn around results, the new ownership can implement major changes: closing locations, eliminating services or laying off staff. In turn, that can result in declining quality and patient outcomes – at least in some cases.
Venture capital, on the other hand, serves a different purpose. Rather than purchasing and consolidating providers, VC capital can be used to fund the infrastructure that is necessary in rural regions to scale access.
During the COVID-19 pandemic, VC funding for mental health apps, virtual offerings and resources skyrocketed, opening up new opportunities in the sector that transcended traditional solutions. That, combined with relaxed pandemic-era telehealth rules, allowed access to new behavioral health resources to enter service deserts that had previously gone without.
Still, when it comes to both PE and VC dollars in rural service deserts, the way capital ultimately flows depends heavily on reimbursement, outcomes, local fit and the sustainability of a care model.
“The single most important thing [for investors] is do not assume all rural communities are created equal,” Dr. Sarah Scruggs, owner and president of RightSet Strategies, told BHB. “Get into those communities. Map them down to towns, villages where these needs exist. … Go into the rural community and meet with stakeholders.”
RightSet Strategies is a health equity consulting firm that Scruggs launched in August 2025 after departing her role as founder and CEO at Arukah Institute of Healing, an outpatient mental health provider based in rural Illinois.
Scruggs is also a member of the National Rural Health Association, a nonprofit membership organization for rural hospitals, clinics and providers with 21,000 members.
“Go into communities and fund what is there,” Scruggs said. “It might look different in each community. Maybe there are two hospitals in this county, but there’s one hospital for three counties over here, and there are a bunch of FQHCs. You have to understand the components, and then you have to fund that system and require collaboration from those entities. And that is how we remove mental health deserts sustainably.”
For GreyMatter Capital, a venture capital firm that backs several mental health organizations, including Nema Health, Coral Care, Pelago, FamilyWell Health and others, the investment strategy for service deserts is exactly that: prioritize local patients, partners and needs.
“I think in a lot of markets, these rates can still make the economics really worthwhile, especially if you’re able to retain those patients and deliver great outcomes,” Anna Wang, principal at GreyMatter Capital, told BHB.
At the same time, investors should not use the same lens across every state or market, because in some regions, rates and margins are tougher than others, she said.
“If you’re recognizing that constraint, willing to pick the right market, willing to experiment and backing a model that’s delivering really good clinical outcomes, then even by serving just a handful of states really well, we still think they can become a really, really big business,” Wang said.
Believing the misconception
What a lot of investors on both the VC and PE side get wrong is believing the misconception that these service desert regions lack the talent necessary to scale quality services. Sometimes this is when newly PE or VC-backed organizations choose to scale telehealth options rather than expanding partnerships and community resources.
Those misconceptions not only damage trust within local communities, but can also set back progress, Molly Ola Pinney, founder and CEO of Global Autism Project, explained.
“In reality, the talent is there,” Ola Pinney, told BHB. “What’s missing is investment in local stakeholders and a real plan to build capacity.”
Global Autism Project is a nonprofit founded in 2003 that focuses on providing training and capacity-building resources for autism services organizations around the world.
It’s imperative that capacity-building strategies not frame service deserts as “a charity case” but rather as opportunities to boost accessibility in a way that is viable just with a different playbook, she said.
“Raise the standards, as if you’re in the most competitive, saturated market there is. … Don’t offer the bare minimum,” Ola Pinney said.
But if investors really take time to understand the inner workings and deeply rooted community connections that exist in these markets, “you’ll find the math can math,” Ola Pinney added.
While mental health service deserts may persist for years ahead, meaningful progress can be made to close the gaps if all parties build care models around local needs and “if we fund communities rather than entities,” Scruggs said.