The Opioid Treatment Business Is Booming

The Opioid Treatment Business Is Booming | Mar 2016

Ray Tamasi, the president and CEO of Gosnold on Cape Cod, has been working in addiction treatment for more than four decades. But he’s never seen anything like what he’s seeing now: private equity investors lining up to get into the treatment business.

Tamasi says several things are fueling this interest — the biggest of which is the opioid epidemic.

Only 10 percent of the estimated 700,000 Massachusetts residents who could use substance treatment actually are able to get it. There are also state and national legislative and insurance changes that have made substance use treatment a projected $35 billion-a-year business in the United States.  

This could be almost as profitable as dealing drugs. 

Hundreds of new treatment beds are being created in New England this year alone. One of the largest projects — which also represents one of the biggest private equity investments in addiction treatment — is now under construction in Danvers. Recovery Centers of America (RCA) is spending some $20 million to renovate the former Hunt Hospital into what will eventually be a 210-bed substance use treatment center. It’s set to open Aug. 1

The facility will provide both inpatient and outpatient care, and Greenstein says it will feel almost like a boutique hotel — with well-appointed bedrooms, private therapy rooms, coffee shops and cyber cafes.

Although he says eventually RCA plans to build other facilities that will accept those with public insurance, this center in Danvers will only accept commercially insured patients or those who pay out of pocket. These are people, Greenstein says, who are now underserved.

The Danvers clinicians will use several methods of treatment, designed around a patient’s needs, according to Deni Carise, the company’s chief clinical officer.

She says because of the lack of treatment beds in the Northeast, many residents have had to go to places like Florida or California for inpatient care. But when they return home after 30 days, many have a hard time connecting with supports to help them in early recovery. So she says staying closer to home will make it easier for residents to transition to outpatient care.

Carise believes the building boom in treatment will also result in something that hasn’t happened in the industry before: proof that treatment works by having providers document outcomes to both attract patients and to satisfy investors.

This could be the ultimate undoing of 12-step groups, since their long term success rate is less than 10%. Even though our government, through the drug courts, is forcing people into these recovery programs, there has never been a study to prove they are at all effective.

Deerfield’s Leslie Henshaw says there are several reasons why money is flowing into treatment right now — mainly the laws requiring insurers to pay for care and the Affordable Care Act provision allowing dependents to stay on their parents’ insurance until age 26. A law that went into effect in Massachusetts last year requires insurers to pay for up to 14 days of inpatient treatment. Henshaw says increased investment will result in better care.

Better care or just better profit?

“We feel it’s an industry that unfortunately is seeing exploding demand. It’s an industry that to date has had very little accountability with regard to delivering on effective outcomes, so we see both an enormous need and an imperative to change the model in which care is delivered,”

Even longtime Massachusetts treatment providers are looking to get in on the more lucrative end of addiction treatment. Spectrum Health Systems, which operates 13 facilities in Massachusetts, just opened a new 36-bed facility in Westborough: the New England Recovery Center.

“I think that we’re probably the most state-of-the-art facility in the state right now,” Faris said. Faris says the facility will also accept only private insurance or patients paying cash. A monthlong stay will cost about $15,000.

It’s a sign the market is responding to the new face of opioid use: young adults with more well-off parents who either have good insurance or are willing to pay high prices to get their child healthy.

“We saw that there was a demand for that part of the market. We saw that there was a niche that wasn’t being filled,” he said. “We saw a lot of private pay customers going out of state for services. At the same time, they shouldn’t be put in a publicly funded bed if they have the resources to pay for it.”

Regardless of the rates, business is booming. Faris says Spectrum’s revenues this year will be around $70 million, up from $60 million last year.

Paula Torch — senior analyst with Avondale Partners, which helps manage public offerings for  treatment providers — says substance use treatment is one of the hottest health care investments right now, and it’s only going to continue.

“Part of that is because of a lot of strong fundamentals: mental health parity, the Affordable Care Act and just the opioid epidemic in general. And there are thousands of sophisticated players getting into the market.”

Strong Fundamentals = ripe for financial exploitation

“We believe that the market is growing at about a 5 percent-plus rate per year,”

One of the largest players in the treatment field is American Addiction Centers, which last year became the first business focused solely on addiction to go public and raised $75 million in an IPO.

The well-known local player in luxury treatment is McLean Hospital in Belmont. McLean is now expanding out of state and is running Internet ads about its new facility in Camden, Maine, called Borden Cottage

While there are concerns that focusing on higher end treatment could leave behind those without resources, many welcome the increased number of treatment beds.

Boston University public health professor David Rosenbloom says the growth will lead to better quality for everyone.

This is the usual argument when private money looking for investment profit floods a public problem. (Jails, half-way houses, for-profit hospitals, etc.)

Amid the trend toward higher end forms of treatment, state Health and Human Services Secretary Mary Lou Sudders says the state will closely monitor the new beds and who is using them.  

The state has little power controlling the situation when so much more money is flowing in from the private sector than is available from public funds.

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3 thoughts on “The Opioid Treatment Business Is Booming

  1. Pingback: Anti-Opioid Propaganda and Profit | EDS Info (Ehlers-Danlos Syndrome)

  2. Pingback: Investors Earning Money From Addiction | EDS Info (Ehlers-Danlos Syndrome)

  3. Pingback: Heroin Overdose Antidote Now Costs Double | EDS Info (Ehlers-Danlos Syndrome)

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