Value Drivers for Applied Behavior Analysis (“ABA”) Therapy Center Valuations

The outlook for ABA therapy centers nationwide is quite robust, which has attracted significant investor interest. As healthcare valuation experts, we’ve seen an increase in the number of ABA-related engagements given the consolidation activity in the market. Valuators need to understand the unique business aspects related to ABA and comprehend how these companies differ from other healthcare providers – even those in the behavioral healthcare space.

What is ABA Therapy?

ABA therapy supports children who have been diagnosed with autism spectrum disorders (“ASD”) to develop crucial life skills and reduce unwanted behaviors. ABA therapy centers provide a structured, controlled environment with trained professionals who use systematic observation and positive reinforcement, often through play-based and personalized techniques, to teach skills such as communication, social interaction, and self-care in small, manageable steps.

Valuators should understand the unique value drivers of ABA therapy centers, including:

• Staff Caseload

Staff caseloads for ABA therapy are small relative to other healthcare providers. Patients often receive 10 to 40 hours of treatment per week – often in a one-on-one setting. A full-time Board Certified Behavioral Analyst (“BCBA”) who supervises and oversees therapy services may have an active caseload of ten (10) or fewer patients.

• Reimbursement

By federal mandate, Medicaid and private insurance plans are required to cover ABA therapy for children under 21 if a physician determines that ABA therapy is medically necessary. In Georgia, insurers are required to cover up to $30,000 to $35,000 per year of treatment, depending on patient age.

• Hours Billed

ABA therapy is billed using a set of Category I CPT codes from the 97151-97158 range. Key codes include 97151 for initial assessments, 97153 for one-on-one treatment by a technician, and 97155 for adaptive behavior treatment by a technician under the direct supervision of a professional. Billing is based on 15-minute increments; therefore, the number of hours billed is a key metric for ABA therapy centers.

• Revenue Per Hour

Revenue per hour, which will largely be dictated by payer mix, also drives value in ABA centers. Centers will often be in network with most major insurance companies, including Medicaid. If not in-network with a child’s insurance carrier, ABA centers will usually attempt to enter into a single-case agreement with the insurance companies. Centers may also accept private pay contracts for families who may not be eligible for ABA benefits through their current insurance.

• Labor Mix

ABA therapy is a labor-intensive service, with labor being the most significant expense for an ABA center. While BCBA’s are the primary providers of ABA therapy services, direct therapy services are often provided by paraprofessionals called Registered Behavioral Technicians (“RBTs”). A Center’s access to specially trained staff and the ability to manage a large staff are essential. A center that can attract and retain high-quality RBTs will generally have lower costs, given significant differences in BCBA and RBT salaries.

• Valuation Multiples

Reimbursement mandates, growing demand for the services, and the ability to leverage paraprofessional staff mean ABA centers can generate significant profit. While we have seen typical profit margins of around 15%, it is conceivable that profit margins could reach 25%. Generally, larger ABA centers are better equipped to maximize staff efficiency and manage labor costs more effectively, which translates into handsome margins.

BFMV has the expertise to value your ABA therapy center. We offer hourly consulting services, as well as formal business valuations. Contact us for more information.