An emerging investment operation is looking to buy up properties and build a portfolio of high-end, ultra-hip addiction treatment centers. With three Los Angeles-area acquisitions so far, Convalo Health International projects to see $50 million in revenue by the end of 2015.
Company officials said in a recent earnings call that Miami, San Francisco, New York and Chicago are attractive markets for future acquisitions. By the end of 2016, Convalo expects to have a presence in six cities in the United States.
Convalo trades on the Toronto stock exchange, but in time, plans to move to a U.S. exchange.
Homogenizing the patient experience is a central focus, however, each acquired center will maintain its locally recognized brand name. The marketing thrust will be based on the city-center locations and clublike atmosphere.
“The typical 22 year-old who was in a nightclub last week has a hard time sitting in a clinic setting for eight hours a day,” said Michael Dalsin, Convalo chairman, during the call. “A big part of Convalo branding is to provide hip, cool places to get treated in the center of the town next to restaurants or cafes with smoking lounges and baristas.”
Dalsin said the marketing message is “sober is sexy.”
Increasing revenue includes a three-point strategy. He said the high-end vibe will ensure longer lengths of stay and increased revenue per patient, while upgrading each facility’s certification and accreditation will ensure higher insurance reimbursements. Increased capacity also will result in higher patient volumes.
Convalo aims to build a network that offers services in the full continuum of care, including detox services, men’s and women’s residential treatment services and aftercare services, which will be driven by cross-selling strategies. With its first acquisition, the outpatient BLVD Centers in Hollywood, Calif., Convalo has increased revenue by 200 percent over six months. Its average collectible in reimbursement is about $500 per day or $10,000 per month, per patient.
More recently, officials announced the acquisition of Hollywood Detox Center and Accredited Rehab and Treatment Services (ARTS) in the Los Angeles area.
“Our valuations are lower than our quote-unquote ‘competitor,’ American Addiction Centers,” Dalsin said. “The reason why they’re not our competitor is because they’re actually buying bigger businesses. We’re surfing at the low end of the spectrum, and we like that. The valuations are lower, and there’s more organic growth, we think, to be had out of those businesses.”
Dalsin and Roger Greene, who is vice chairman, also lead the $250 million Patient Home Monitoring tech company that offers FDA-approved handheld devices that monitor chronic disease measures. Its strategy of consolidation and cross-marketing is similar to what officials are applying to Convalo.
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