The intellectual and developmental disabilities (I/DD) sector is a highly fragmented landscape where smaller not-for-profit organizations and government facilities have traditionally represented a significant share of providers—but that’s starting to change. Numerous for-profit and nonprofit providers are increasingly seeking expansion through acquisitions or partnerships. Similar to trends seen in other areas of health care, I/DD and behavioral health organizations in general are steadily consolidating.
The push toward consolidation stems from the migration away from larger, state/county-operated institutional settings and a need for greater efficiency and scale required to maintain reasonable margins. Many nonprofits are merging with or being absorbed by larger organizations to stay viable in a dynamic and challenging marketspace.
Market Pressures and Strategic Planning
For years, the sector has been moving away from institutional care and into community-based home care settings, and that shift is expected to continue. Likewise, value-based reimbursement models are gradually gaining traction over traditional fee-for-service models.
The I/DD industry continues to face staffing shortages and tough reimbursement environments in several states. As these challenges persist, more providers are looking to M&A strategies—whether through partnerships or preparing for a strategic exit.
Role of Technology and Capital Needs
Technology continues to be a key tool for providers adapting to labor shortages and operational demands. Electronic medical records (EMRs), clinical platforms, and assistive technologies are improving care, easing documentation, and helping people with I/DD live more independently while reducing strain on the professionals who support them.
The capital needed to fund these improvements is another main driver for achieving scale. Most experts agree that consolidation will continue across the nonprofit I/DD space, with both large for-profit and nonprofit providers expanding via acquisition. Meanwhile, reimbursement remains a persistent hurdle, and with potential Medicaid cuts on the table, significant improvement in the near future doesn’t appear likely.
Planning for the Future
Now is a critical time for I/DD leaders to consider their M&A strategy and potential acquisition or divestiture plans. Whether the goal is to grow through acquisition or prepare for a transition, careful planning is key. Stoneridge Partners has provided M&A advisory services in behavioral health for over two decades, and we welcome the opportunity to help your organization explore options for acquisition, partnership, or strategic exit planning.
Dan Huckestein is Vice President and Associate Partner at Stoneridge Partners. Peter Lynch is an Associate Partner at Stoneridge Partners.
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