My name is Jonathan Mueller. I'm the host of Building Better Businesses in ABA and my guest today is John LaRosa. John is the owner of Market Data llc, a 40 year old market research and consulting firm that tracks a variety of services and industries. All their research is independent, which means it's not funded nor commissioned by third parties. Welcome to the Pod, John.
Thank you. Good to be here.
So John, just in, in September of 2022, you published the third edition of the US Autism Treatment Centers Market that just has a wealth of data about our field. So I'm really intrigued, to learn from you on this and I guess the first question is like, how big is the ABA industry? how has that changed since, since this is a third edition, that you've published since 2017?
Yeah. One of the things that we, found and discovered between the first edition that we did in 2017 and the most recent one, is that this market is much bigger than we originally thought.
In the five years since the first analysis that we did, we've discovered more for profit chains and we've seen the, the industry grow as the awareness of autism has increased in the United States and the advocacy efforts of a lot of organizations in this field have really helped to increase insurance coverage and get the word out that these, ABA or applied behavior analysis programs exist and can help, not only autistic children, but autistic adults.
We estimate that the treatment market is conservatively valued at least 4.1 billion as of 2021. And this is a lot higher than we thought in, in 2017. The pandemic did affect the industry somewhat in, in the early months of the pandemic where, people didn't want to go to schools or, treatment centers in person because they have fears of getting infected or their children getting infected. So they had to switch to, virtual delivery of services, but they very quickly did that.
So that, the effect on revenues and the industry, really wasn't too bad at all. In 2020 at the treatment programs really held up a lot better than we expected. So as far as the outlook for growth, we think that, the for profit chains are gonna grow about 7% annually in terms of revenues and the nonprofit, treatment centers or schools are expected to grow about 5.4%.
This really is a growth market and it, the next five years we should continue to see growth because the number of autistic children is now, one in 44, I believe, according to the cdc. So there, there's a lot of untapped. Potential and high demand for the services of, ABA programs.
Yeah, and I think that's what many aba, practices are seeing, Just extraordinary needs from families. I'm curious, your, um, estimates on the number of ABA treatment centers out there, and then, I'm intrigued by that idea. the 7% growth for profit chains and 5.4% growth going forward for non-profit chains. And what, what drives the difference in growth rates between them.
I think the for-profit chains, they're backed by private equity firms and, they have the money to invest in more marketing personnel. a lot of these ABA programs are started by individuals with small groups and people that are focused mainly on the clinical aspect of the business, but not so much on the business aspect. It, it's important to remember that these are clinical treatment programs and so you can put them under the scope of, a medical or a wellness program.
But you have to remember that it is still a business. And to stay in business, you have to make a profit and you, have to do some marketing and get your name out there and differentiate yourself from the other local providers. There is competition and you do have to treat it like a business.
The main difference between the for-profit chains and the non-profits is that they have more business and marketing experience and more funds to acquire, existing centers and roll them up into a larger organization
And how many do you have estimates on the numbers of say, for profit versus, non-profit ABA practices.
We know that, the for profit chains operate an estimated 926 brick and mortar centers, and they're aggressively acquiring competing centers and building new ones. On the, nonprofit side, we estimate, that there are at least 1600, I'm sorry. the total of the non-profit and the for-profit centers is about 1650 so 1650 minus 926. Probably about 700 to 750 nonprofit treatment centers out there.
Gotcha. And does that include, is that all the brick and mortar or would that include, practices that also provide home based or community based or other, or treatment in other locations?
Yeah, our numbers are estimated based on, the guidestar.org, non-profit database. They track a lot of non-profits and we did a search for autism treatment centers and came up with literally, Thousands of records, but a lot of those records and listings are for foundations and people that are involved in advocacy and funding and, they're not a hundred percent treatment centers or brick and mortar centers where they're running programs.
So we had to estimate, what percentage of those listings were for actual brick and mortar centers and it, we came up with about 750.
and I think, for listeners who aren't aware, so guidestar.org is a freely accessible online database of, every nonprofit, every 501C3 in the country and, and, nonprofits are required to file annually with the IRS. a effectively a, their financials and, and a variety of other information. So it's impressive that you went to the level of detail of pouring through every one of those. That, that's one of the things that, that stood out at me in this research.
And, know, I'm curious, what are some of the other things that you see driving aside, driving growth in the field, aside from certainly a lot more need, given higher CDC diagnostic rates, but, are there other things that are at play here that are, that are making this a much bigger field than you originally saw in your research
yeah. again, getting back to the Guidestar database, they have some excellent information because they, contain the IRS 990 tax forms, which what the nonprofits revenues. So we looked at the, IRS data for 2018 through 2020, in some cases, 2021, most of the time the data only went up to 2020.
Very few had 2021 data but, one of the, the new aspects of our research for this particular edition of the report is that we wanted to get a very good handle on what happened to the non-profit organizations revenues in 2020 during the pandemic, what was the percentage increase or de decrease in their revenues from 2020, versus 2019. And what we found was surprising that this group, their revenues increase by 6.8% in 2019 and grow, actually grow another 1.3% in 2020.
So the growth rate did decline during the pandemic in 2020, but not drastically. So that was a surprise. the revenues in 2020 for the nonprofits were estimated, at about 2.73 billion.
Wow. and that accords, I think with some of what I saw at my organization, Ascend Behavior Partners where there were certainly some pauses in, where families wanting to take a break from services and, and there were also a lot of families who said, hey, now in the midst of a global pandemic, we need ABA services more than ever, especially as schools shut down.
And, and so I'm curious, the, so the GuideStar is a great explanation for sort of level of digging that you and your team did, to estimate revenues for non-profit sector. How do you estimate revenues for the for-profit sector when, vast majority, if not every ABA practice, at least that I'm aware of, is a private company that is, they're not
Yeah, for the for-profit chains, what we did was we took a ground up approach and we just looked at each company individually, say the May Institute, the May Institute is one of the private companies, one of the few private companies that does release financial data and so we found that based on their revenues and the number of centers that they operate, their average revenues per center in 2021, were about 951,000 per year.
So we used that as a proxy to estimate the revenues of the other for profit chains based on the number of centers they had. if they operated 100 centers we just took a hundred times 951,000 and, came up with an estimate for that company. So, it's important to realize that there is no official, source of revenues or operating metrics or benchmarks for this industry by the census, by the Census Bureau, by the government, by any other private sector, trade associations or clinical associations.
It it has to be done by, market research companies like ourselves with some assumptions and some estimates based on whatever data we do have.
I'm actually, that's really intriguing. Power to the May Institute, where even though they don't have to disclose, financial statements and data, that they still do that. And I, it's one of the things in healthcare, I think probably one of the reasons our healthcare system is so expensive is there's not price transparency. That is a consumer couldn't just go like you would if you're ordering a latte you could see the different prices, on a, on a coffee board.
You can't do the same thing when you're accessing healthcare services. It sounds like May Institute is pretty unique when it comes to that, but is that any kind of trend you're seeing more disclosures of. of financials and, more price transparency or is that outside the scope of the research?
it's still pretty difficult to get any kind of financial information from the for-profit chains. So like we said, with GuideStar, you do have the revenues as reported to the IRS because they're a 501c3 nonprofit. But on the for-profit side, very few people want to talk or be interviewed about the industry. the. It's very tight-lipped.
And even though they're, they're run by private equity firms, I think people are very hesitant to talk about the industry or their operations in particular for fear of competitive reasons they just don't wanna disclose. so I don't think that'll change in the near term. I think they'll continue to keep that information close to the vest.
And John, you see a variety of different services and or service fields and industries and I'm curious, how do these growth rates, as you were describing, 7% annually and 5.4% annually for profit versus nonprofit? I Is that faster? Is it slower than other healthcare sectors?
it's hard to say. there are some high growth healthcare sectors where there, there's, a lot of demand, but, this is a pretty good growth rate when you're seeing 6, 7% growth per year and, you have a market that's really not that affected by recessions, that's unique. Right now there's only about 30,000 ABA therapists that are, certified in the United States and that is well under what it should be, and the number of treatment centers is, is a lot lower than the demand.
it's important to realize that there's 5.4 million, autistic children. I'm sorry, 1.4 million autistic children in the United States and another 5.4 million adults. So that's 6.8 million autistic people in the United States that need some form of treatment. Granted, the adults that are over 18 years of age are probably not enrolled in ABA programs, but, the 1.4 million, children, a lot of them are.
And, so demand is really outstripping the supply, right now by a large margin and for the next five years, foreseeably.
Yeah. And that's kiddos who have actually been diagnosed and we know the trend over the last 20 years just looking at the CDC data, is that it is increasingly, there are increasingly higher diagnostic rates. So that's probably on the one hand, as you referenced earlier, why maybe these numbers are a little conservative. I think some of the data that I've seen from the Behavior Analyst Certification board for a number of BCBAs who have. Certified is actually closer to 50,000.
But I wonder if comparing that to the 30,000, is that sort of practicing versus all BCBAs who are certified or tell me more about, that data.
not too sure about those numbers. One thing I wanted to mention also is that the insurance coverage has increased from 36% of the, autistic children being covered by insurance in 2016 to about 64% today. So that's another reason why the, the market has been growing.
Oh wow. So in, in 2016, if I understand you right, the 36% of children with autism had some type of insurance that covered it, and now today it's 64% of kiddos.
Yes. according to, Autism Speaks I believe. So you know, you have a, a combination of demand outpacing supplier programs, more favorable insurance reimbursement, private equity investment, and the rising incidence of autism among children. All of this points to sustain growth over the next five years.
know, you also mentioned earlier about, recession, right? And I know that's some of the talk in the macro economic climate that, that maybe we're, we maybe we're in a recession in the first half of, 2022, at least by the technical definition. And, with rising interest rates, there's a chance we're gonna see another recession next year, in 2023. And, healthcare, as you describe it, can, is sometimes considered recession resistant.
Maybe not recession proof, but recession resistant, just because they're, we need healthcare services in the best of time, economic times, and in the worst economic times. what other implications do you see if there were a recession? Is that gonna impact, demand and access to services? Is it gonna impact what happens with, growth in ABA providers?
I don't think that a recession, if it comes, will have much of an effect on this industry just because of the, combination of factors that I mentioned you, the increase increasing insurance reimbursement, the continued high number of children with autism.
The fact that, public awareness is increasing about these programs, the fact that, the for-profit chains are building and adding new centers as well as acquiring existing ones, I like we in, 2020 versus 2019, if the growth rate only declined from 6.8% to 1.3% during a pandemic, which, that was a much bigger event and a much more drastic event in terms of its effect on, revenues and operations than a, a regular recession would be.
So, you know, It, the growth rate may come down a few percentage points, but I don't see it, dropping by 5 or 10% or anything, very significant.
I gotcha. To be clear, like it dropped to 1.6% positive growth. It was still growing in the midst of a global pandemic. It wasn't negative growth, whereas we saw many other industries actually see And that's compelling it. What were some of the other, or most surprising findings.
The most surprising finding was that the, that the industry or market is much bigger than we thought. probably double the size of what we estimated in 2017. And the second surprise was how well the, the non-profits, and probably the for-profits as well held up during the pandemic. those were the two surprising findings and also just the sheer number of organizations out there that exist.
when looking at that GuideStar database, again, literally thousands and thousands of local, nonprofit organizations that are focused on advocacy, awareness funding, foundations, resources, resource portals and, support organizations. It's just a tremendous number of them across the, United States.
John, do insurance companies publish any, any data that's made public about claims reimbursed or, level of spend that they have on ABA services, or is that generally held closer to the vest?
We didn't see too many reports related to, insurance. What we did see a couple of reports by, state legislatures, like in Missouri and California, where they talked about the average cost of ABA treatment program. Based on claims data and in there, there was quite a variation as well. in California, the average cost of, an ABA program per year, per student was about $9,000, and in Missouri it was about $4,428.
Looking at those numbers, if you multiply that average cost times the roughly 1.4 million children in treatment then, that varies considerably in terms of the size of the market. So in fact, one of the, for-profit chains, Butterfly effects, has estimated that, the industry could be worth as much as five to 8 billion even higher than the number we.
Oh my gosh. And that's publicly available data is, I'm curious what drives that number
We, we got that information from, a quote from a published article about the industry where they cited, someone in management from Butterfly Effects. so it, it wasn't in a, an annual report or 10 K. Most of these companies are private and then, they don't have 10 K or annual report with, with statements like that. But, it came out of an interview and a published article.
Wow. And a 10 K for clarification, for listeners, that's the, the required annual filing that reports on their financial statements and a variety of other things. John did you see, or I don't know if, the report has this level of breakdown, but is growth in the ABA field, is it pretty even across different geographies, and service locations, or does it tend to skew,
We didn't look at the industry on a regional basis. It's a national analysis. we just don't have enough data to break it down, by state or region. Normally for a lot of markets, we would have that information from the Census Bureau. But, the Bureau of the Census doesn't designate this market or industry with a, a code where they collect data every five years. they, it's really not considered a traceable industry yet. And that's one of the problems hopefully that will change in the future.
And they'll assign an NAICS code, which stands for North American Industrial Classification System. They'll eventually assign a code to the, treatment centers in this industry. But, I think we were a little few years away from that.
Tell me more about getting assigned an NAICS code, what leads to that, and then what would that mean in terms of the kinds of publicly available information on our field?
the large players in the industry would have to petition the Census Bureau to, create a new code. For the industry and, and then the Census Bureau would look at it in terms of, what information the treatment providers would be willing to provide. whatever forms that the government provides, the information is aggregated, so you don't know what the revenues of a specific company are.
It's all lumped in together and then they make an estimate of the industry size and, growth rate from year to year. And they also collect, some other metrics like payroll as a percent of sales, uh, number of establishments in the industry revenues per establishment of, single unit versus multi-unit firms. And they classify the, the establishments by type and by size and by state and region. So all of that would be completely new data for the industry, which would be great.
Wow, and that all falls under the Department of Commerce
Yeah. Census Bureau. Yeah. Census of service industries.
Gotcha. But it sounds like we're a few years away from having all of that publicly available data. You mentioned earlier that, there's, acquisitions are happening of smaller providers, and I'm curious, is there any other insights that you have or what you're seeing in terms of market consolidation?
it's an industry where there's still a lot of, small mom and pop. Private companies in the business. And so we think that you'll continue to see a lot of, roll ups and, and acquisition of, privately owned companies by the, large for profit chains. As I mentioned, private equity plays a big role in this industry right now and has for the last decade or so, there's a, total of about 60 private equity firms, including Blackstone and KKR.
Some of the biggest ones out there that have invested literally billions of dollars into the, autism treatment industry. And, they see that the combination of growth factors that exist in this industry is very attractive and, that, that's why private equity is investing in it because they see a lot of untapped market potential and future growth, and that's what they look for.
Have you seen any data around, call it the top 10, top 20, top 30, whatever, pick the number, of the largest ABA providers, what percentage of that total $4.1 billion ABA market that represents.
yeah. as I said, the there's 13 large multi-site ABA providers that we've been able to identify, and they operate an estimated 926 brick and mortar centers and they're acquiring more centers and building new ones together. We estimate that they account for at least 946 million in revenue and have a 26% market share of all ABA programs. So yeah, private equity, accounts for at least a quarter of the industry's revenue.
Gotcha. Wow. So the 13 largest, account for 26% market share
Right?
what's your long term outlook? For the ABA field in addition to what you've described of, increasing diagnostic rates and a field that's growing fairly quickly.
think that, Over the next five years, the industry will continue to grow. And, there's still a lot of, untapped demand out there. And, because of the factors that I've mentioned so far in the increasing insurance reimbursement, increased awareness among the public, increased marketing clout and business experience by ABA providers, and the role of private equity. it's, it looks like a very strong growth market for the next five years and even through a recession.
And John, who tends to buy, your reports, the research that you put out.
The companies in the industry course, the for-profit chains would be likely buyers of our report, as well as the non-profits, anyone who's interested in a comprehensive analysis of the industry. Could be a private equity firm, it could be, a merger and acquisition candidate anyone who, does consulting for the industry or analysis of it, suppliers. People that, may have software that the ABA programs use.
it, It's a multi-client study, so it's not done for any particular company or group of companies. it's for anybody that's interested in really getting a detailed analysis and status report of the industry and where it stands now, where it's been in the past and where it's going in the future. As I said, there are very few, reports or data out there in the absence of, trade association or government surveys.
There are some other market research studies about the autism treatment industry, but 99% of them focus on the medications and the, the pharmaceutical market for treating autism. And, very few, if any other than, market data have looked at, comprehensive analysis of the actual treatment programs.
Yeah, that, that's how our report is different from all the other reports out there, that they're mainly focused on the pharmaceuticals and we're mainly focused on the treatment programs and the centers.
Yeah, this is just a treasure trove of data. and to your point, it's nothing that I've ever seen publicly of available before. and I want to, what's also really important to me is know that in and among all of these sort of macro statistics, like every one of these kiddos represents a child and family, in need of services. And, and that's really important to remember. John, where can people find the report and find you online?
they can find the report at marketdataenterprises.com, which is our website and on that website, they can find a detailed table of contents and a description of the report and they can purchase it online, or they can contact us at our headquarters in Tampa, Florida at 8139718080. They're probably, our, press releases out there that we've released to the public.
So if people do a search on Google on, the autism treatment market, our press release and information will probably pop up in that search.
we'll definitely drop a link to the show in the show notes with that info. Now I know our listener's gonna hear this, later in the fall, but, as of the day of recording, Hurricane Ian sounds is bearing down on Tampa. How are you doing? Are you staying safe, John? And.
Yeah, it, looks like it might go a little south of Tampa, more into Sarasota Bradenton area but, as you know that these storms Are fickle and they can turn at last minute. Tampa has been very lucky and we've dodged a bullet for a long time. I've been living here for 26 years and we haven't been hit with a major one, a direct hit so far. It always seems to go toward the panhandle or out to the Gulf or south of us, or east of us.
but everybody is, taking it seriously and of course the wind is the main thing. And the people that live on the coast and near the water would be affected by the storm surge. But we're, I'm located, probably about 20 miles inland so we're not concerned so much with the storm surge as the, flooding and the amount of rain that we get and the wind. But, hopefully it won't cause too much.
it's scary stuff and I'll be crossing my fingers and sending positive thoughts and, and prayers yours and your community's way that you all stay safe. John, are you ready for the, hot take rapid fire questions that we do for every,
Sure. Why not?
Oh, I love the attitude like I talked to my kids about try anything twice, right? All right, so to start, you're on your death bed. What's the one thing you wanna be remembered for?
I'd like to be remembered as a good person who treated people the way he'd like to be, treat a good father that raised a couple of, good sons and saw them on their way to get educated and established in their career, But, I think primarily to be a good person that, treated other people fairly and and nicely.
What's your most important self care practice?
Most important self care practice. That would be to have balance in my life between work and play. I think it's important to not focus all on work and have some hobbies. I like to, go bowling. I like to play golf. I like to ride my bicycle. I like to go fishing. So I think it's important to have balance in your life.
What's your favorite song?
Favorite song would be, A Horse with No Name
Oh,
who was it?
as an Uber classic I'm seeing in my head, I will not make our listeners, hear me sing, but, oh, it's just one of those that, creates a mood, I think, unlike
Yeah, it's just like a haunting song, the, song that stays in your mind. And, I've liked it since the 1970s
was it America that
it might been America. Yeah.
if you could give your 18 year old self one piece of advice, what would it be?
My advice would be to be patient in all things. I think when you're young, you tend to act impulsively and based on emotion, and I think if you. Look back on when you were younger, maybe some things you wouldn't have done as quickly or reacted as quickly. So I think it's important to sit back and think and be patient.
Love it that's advice my 18 year old self could have used less impulsivity. More
And, invested in, Warren, Buffet's, Berkshire Hathaway.
smart, the all time legend of value or any kind of investing Warren Buffet, we could have a whole separate podcast episode on, on him. And finally, John, you can only wear one style of footwear. What would it be?
It would be some comfortable sandals like you would wear to the beach.
Nice. Versatile. John, thank you so much for coming on the pod. Thank you for, contributing to the breadth of information and knowledge on our field. I appreciate you being on.
I appreciate you having me. Thanks for the opportunity.