While there has always been a need for addiction treatment, clinical models and payment models have changed throughout history, leaving executives in a landscape today that challenges them to prove the value of their services. Doug Tieman, president and CEO of Caron Treatment Centers, took attendees of the Treatment Center Executive and Marketing Retreat on a journey from the early years of treatment to the current era.
According to Tieman, in the mid-20th century people starting getting well through three approaches: the Minnesota model; the therapeutic community model; and methadone maintenance.
There was a lot of treatment center growth in the 1970s because public opinion of treatment was positive and funding sources were prevalent. Programs grew in number from 500 in 1973 to 2,400 in 1977.
However, most leaders didn’t get into the business for the money.
“There was zero difference between for-profit and nonprofit in the 1970s,” Tieman said. “They were all do-gooders trying to get people well.”
The 1980s saw an incredible boom, with the number of programs growing to about 9,000 by the end of the decade. But competition and business interests soon emerged. Meanwhile, society began to question the costs and benefits of treatment.
At the same time, Nancy Reagan’s “Just Say No” campaign launched and incarceration became a preferred approach by many stakeholders who believed addiction was simply the result of individuals making bad choices. The concept of spontaneous remission became popular, and insurance companies began leveraging utilization review. Funding and public opinion had shifted.
Half of the existing treatment centers shut their doors between 1990 and 1995, Tieman said—even the best known and most clinically sound facilities. And it’s a lesson for today’s operators.
“Rich history doesn’t guarantee you survive,” he said.
Tieman recommended that today’s treatment centers begin by prioritizing their revenue path and expansion strategies. For example, the not-for-profit Caron Treatment Centers has chosen private pay over public funding, complemented by a philanthropy model. The move helped Caron stabilize its business in the late 1990s and into the 2000s.
In 2014, Caron doubled down on its focus, divesting properties that didn’t fit its strategic focus and launching a $70 million capital campaign to build medical centers and make improvements in existing facilities. This year, Caron will raise over $12 million in cash as part of its double down strategy. In addition, Caron has had more cash and endowments than total debt for the past several years, he said.
“Have a clear vision for what you want to do and stick with it,” Tieman said. “Whatever path we pick, we’ve got to be extremely good at it.”
He said the recent interest from private equity has been a game changer, allowing small organizations to streamline and capitalize their operations. The investments will bring business practice sophistication as individual centers are rolled up into single entities. But challenges remain.
“We still face the challenge of proving what we do works,” Tieman said. “Society always challenges—you read this in the media—asking, ‘does treatment work?’ Insurance companies continue to question what really works.”
He noted that in his discussions with insurance companies, they say they want to pay for good results, but in the absence of proven outcomes, they instead opt to pay for treatment based on cost. While more funding is needed to treat Americans with addiction disorders, the need for true and verifiable outcomes is pivotal.
Finally, Tieman noted that treatment centers need to do a better job of diagnosis to optimize the appropriate clinical pathway for each patient. As the clinical modalities are blending, shepherding the patient toward the treatment that works best for him or her will be an industrywide imperative.
Get the latest information on Private Equity and other valuable topics at this three-day retreat bringing together treatment center owners and executives and key members of the financial community for prime networking opportunities and in-depth discussions for those looking to grow, invest and transform their business.