The business of treatment

Apparently there has been some turmoil at Hazelden over a new CEO’s modernization of their business practices. It doesn’t offer much detail, but here’s a little history:

It started in 1949 in a farmhouse where men followed a recovery program based on the Twelve Steps of Alcoholics Anonymous. Teams of psychologists, chaplains and clinicians developed an approach that was copied worldwide.

But by the time Jerry Spicer became chief executive in 1992, managed-care companies had decided they didn’t like what had become known as the Minnesota Model, with its costly, long-term inpatient approach. They preferred cheaper short stays and outpatient care. Hazelden felt the cost pressure. Hundreds of other centers closed or downsized.

An outsider moves in

A decade later, Spicer’s successor, health care executive Nick Hilger, lasted one year. In 2002, Breyer was plucked from Hazelden’s board and made president and chief executive.

She had been vice president for marketing at Ryan Companies, a commercial real estate developer. Breyer brought an outsider’s corporate sensibilities to the insular treatment field. Hazelden inked a contract with Blue Cross and Blue Shield of Minnesota, which now brings in about 30 percent of Hazelden’s patient revenue.

That Blue Cross contract opened the floodgates to insured patients but squeezed out those at the high and low end. Therapists and alums used to referring patients wouldn’t always get their self-paying patients in the door. At the opposite end, charity care fell.

Still, it was hard to argue with the numbers: In 2007, Hazelden had operating revenues of $109.3 million and a record 10,754 patients. Donors gave a record $12 million.

Despite Hazelden’s traditional devotion to abstinence-based treatment, Breyer approved use of new pharmaceuticals to treat addiction.

She won some fans. “People generally thought highly of Ellen,” said Jill Wiedemann-West, Hazelden’s senior vice president and chief operating officer of clinical and recovery services. “She brought a vision.”

In 2006, Breyer brought in the Hay Group, New York consultants who grouped Hazelden’s activities into three “strategic” businesses: treatment, publishing and the graduate school. Fundraising was a fourth important area.

“Trying to get your hands around that organization was like trying to sort stuff out of cotton candy,” Hunsicker said. “Ellen, for good, better or worse, rolled up her sleeves and said I’m going to build some accountability.”

That year, the National Association of Addiction Treatment Providers named Breyer Administrator of the Year.

By the next year, Hazelden executives began leaving.

General counsel Ivy Bernhardson became a Hennepin County judge. Carol Falkowski, director of research communications, is now director of chemical health at the Minnesota Department of Human Services. Both declined to be interviewed.

Chief Medical Officer Dr. Marvin Seppala left to head an in-home treatment program. Vying to return as Hazelden’s chief executive, he declined to talk.

Mike Ranum, chief financial officer and chief administrative officer, joined an architectural firm in St. Paul. He did not return calls for comment. Nor did Tom Galligan, former market development chief.

All left, Breyer said, because of other opportunities. The departures “had very little, if anything, to do with me,” she said.

Moyers, working on public policy, had become Hazelden’s most recognizable public face. He also tried to leave last year but stayed after Hazelden funded a Center for Public Advocacy and put him in charge.

But to others, she represented a break from the Hazelden of old, where being in recovery was a credential as good as any fancy academic degree.

“The addiction field has been known for its warmth, its compassion, its affirmation,” said Hunsicker. “Ellen brought with her a bit of an aloofness.”

These are strange times in the field of addiction treatment. In the wake of the collapse of much of the addiction treatment system, many are seeing financial opportunity. Prometa, tv shows like Intervention and Celebrity Rehab, boutique treatment programs for the rich and famous, recovery coaches for hire, etc. There’s a trade publication with cover stories like, “The King of Methadone” and “The Big Money Cometh”. The magazine celebrates the business of addiction treatment, “high end” providers, and focuses one the scores of acquisitions that are creating some enormous companies with enormous profits.

It seems to be an era of entrepreneurship in addiction treatment and I find that pretty frightening.

The article didn’t say much about what exactly is changing within Hazelden’s culture. Smart business practices don’t have to mean abandoning their mission, hopefully Hazelden will avoid some of the pitfalls that many other providers seem to be stepping in. Although, it’s worth noting than many people think that Hazelden was one of the first providers to turn treatment and recovery into big business.