Positive Development: Initiation of Coverage Report

The challenge of balancing access, quality, and cost isn’t unique to Medicaid, or to behavioral health services, but it is an area where these tensions often play out in charged, public ways. An extreme example of this is playing out in Nebraska for Autism Spectrum Disorder therapy services, where Behavioral Health Business reported a “huge increase in the costs related to covering ABA. In 2020, Nebraska Medicaid paid $4.6 million. In 2024, that cost increased to $85 million, a 1,747% increase” necessitating 48% rate cuts for Applied Behavior Analysis (ABA) service providers.  

Nebraska was an outlier in terms of reimbursement rates for ABA, the therapy modality that has historically been the default choice for spectrum disorder therapies, but unsustainable cost growth for ABA services is a topic of conversation in state capitols and Medicaid Managed Care earnings calls alike. Colorado’s Department of Health Care Policy & Financing shared this slide during its annual stakeholder meeting noting a smaller but still significant increase. 

During Centene’s second quarter earnings call, they shared that the most significant driver of their Medicaid portfolio’s "unanticipated and unacceptable health benefits ratio (HBR) of 94.9%” was Applied Behavioral Analysis spending, promising to support their markets in “aggressively managing this trend.”

Aggressive management of this trend is typically in the form of rate cuts, like what we’re seeing in Nebraska, or utilization management which face resistance from families and advocates and in some cases, lawsuits based on state and federal laws. 

A significant component of the challenge is a mismatch between demand and supply with time on a waitlist for therapy around 5.5 months or more depending on local market conditions. This has been driven by a rapid increase in Autism Spectrum Disorder diagnoses with prevalence rising from 1 in 150 children in the year 2000 to 1 in 31 children according to the most recent CDC numbers. Despite a sharp increase in Board Certified Behavior Analysts, there’s a more than 25,000 gap between BCBA certificants per year and job postings that require or prefer a BCBA certification. 

Critics have also pointed to the significant investments private equity has made in the space as compounding the problem, but there are real advantages and trade-offs of this investment activity that make a black and white call on the merits difficult.

Another component is an overall increase in “intervention intensity amount”, i.e. more hours of therapy, as, “health professionals routinely recommend intensive interventions (ie, 20-40 hours per week) for autistic children.” 

Back of the envelope math based on population, prevalence, and pricing estimates supports a ~$39 billion dollar market size, but market research reports on the subject estimate it as closer to ~$4 billion today with supply constraints helping to reconcile some of the gap between the theoretical demand and current market size. 

Positive Development is a care delivery platform scaling an alternative therapy modality to Applied Behavior Analysis called Developmental Relationship-Based Interventions (DRBIs). DRBI differs philosophically and operationally from ABA in a number of ways although they are both recognized as clinically effective interventions for people with autism. 

From a care delivery perspective, Positive Development offers in-home and in-center care, and patients are supported by an employed, interdisciplinary team of licensed speech, occupational, and mental health therapists as well as paraprofessionals. 

Supporting the care model is technology focused on population level quality and outcome measurement, clinician workflows and interfaces, and patient and family experience.

A significant on the Autism Spectrum Disorder market right now is the supply and demand mismatch. This constraint is a function of too few providers with too few hours a week to provide therapy to all the patients that might want it or benefit from it. 

Positive Development’s model helps shift the supply curve to the right by using its provider resources much more efficiently than ABA providers. Whereas hours of therapy for ABA treatment range from 10-40 hours per week per patient with an average closer to 25 hours per patient per week, Positive Development’s model averages is between 6-7 hours per week with an upper limit of 15 hours. 

This theoretical shift in the supply curve helps explain how Positive Development “delivers outcomes at 50%+ lower cost than traditional ABA therapy.” Significant unmet needs due to supply constraints allow Positive Development to charge lower prices while maintaining same or better unit economics than the ABA providers who, in addition to the lower efficiency, also need to manage debt service payments from the private equity financing that brought the platforms together. 

Taking Colorado’s Medicaid spending on ABA as an example, here is an internal sensitivity analysis HTN created assuming different percentages of adoption of Positive Development at 50% of the cost of ABA:

Positive Development’s biggest competitive challenge comes from the incumbent, private equity backed ABA platforms which have advantages rooted in their ubiquity, incumbency, and inertia. ABA has historically been the default choice, and many state laws specifically name ABA as part of required coverage for health insurance. 

Other potential sources of competition include venture-backed start-ups like Headstart Health and Alpaca Health who are building two-sided marketplaces which match ABA providers and families along with business-in-a-box tooling which allows ABAs to build their own practices outside of the private-equity owned practice model. In our view, these companies represent a larger competitive challenge to Positive Development than the PE-owned practices because these models are premised on unlocking potential supply in a similar way that Positive Development albeit through a different mechanism. PE-owned practices tend to prefer or require minimum hours, and these platforms are making it easier for a Behavior Analyst who used to work with 1 client for 30+ hours a week to work with 3-4 for fewer hours depending on their needs. 

Finally, another therapy modality for Autism Spectrum Disorder is naturalistic developmental behavioral intervention (NDBI). Individual and small chains focused on NDBI exist, but these don’t represent real competitive pressure at this point without institutional investors backing them. 

Given the significant mismatch between supply and demand, competitive pressure is unlikely to be the limiting factor for any of these businesses. Rather, creation of new supply of therapy providers and the efficiency of that supply will be positive sum for patients, the businesses delivering the therapy, and the payers footing the bill. 

With their recent Series C, geographic and membership expansion is top of mind for the business. Their go-to-market motion has two dependencies: payer contracting and building clinical teams. For payer contracting, they target a degree of regional density since much of their therapy happens in-person. For building clinical teams, Positive Development pursues small acquisitions as well as de novo builds and are able to source clinicians through their growing professional network. 

ABA cost growth is a concern for virtually every Medicaid Managed Care Organization and state Medicaid agency across the country, so the challenge for Positive Development is identifying regions that meet the contracting and clinical team requirements. 

Setting aside the competitive challenges discussed above, three unique risks come to mind when considering Positive Development’s business model.

First are questions of scaling a services-based business which have had varying degrees of success historically. Some models, like dialysis centers from DaVita, have scaled well balancing returns to shareholders, clinical quality, and cost. DaVita also provides a cautionary tale of how this can go wrong with their acquisition and divestment of HealthCare Partners. With 17 regions currently active, it seems reasonable to posit that DRBI is closer to dialysis than primary and specialty care in its ability to scale nationally, but it’s too early to say definitively.

Given the impressive 50% cost savings they cite, a second set of questions are concerned with where to draw the limits of Positive Development’s addressable market. Is Positive Development’s approach clinically appropriate for 100% of patients currently using ABA? Said another way, we’ve considered how Positive Development’s model could be a more efficient substitute for ABA, but it’s possible there is a ceiling in terms of the subset of patients who can benefit from the increased supply they are unlocking. What about patient and family preference?

Finally, the third thematic risk we’re considering is in the area of persuasion and patient preference. Given the degree of entrenchment of ABA, there are significant marketing, education, and advocacy efforts around sustaining its incumbency advantage. Overcoming inertia requires energy, and it remains to be seen how much energy is required to overcome ABA’s default choice status for payers and families. 

https://www.positivedevelopment.com

Series C: August 6, 2025, new investor aMoon co-led the round with B Capital and Flare Capital Partners with participation from Digitalis Ventures, Healthworx, and others

HTN interview with Mike Suiters, CEO of Positive Development