$2.2 billion invested in addiction treatment and behavioral health companies


photo credit: ntoper
photo credit: ntoper

Businessweek has a damning investigation of for-profit methadone treatment. And, who knew that Bain Capital is such a player?

Since Jan. 1, 2009, CRC’s clinics haven’t met staffing standards more than 50 times, regulatory records from 15 states show. Clinics were cited 80 times for failing to document that they gave patients enough counseling. In response, the company agreed to hire more, recruit more aggressively and increase supervision. Competition for qualified workers is intense, CRC said in its 2011 annual report.

CRC didn’t pay well enough to attract or keep experienced counselors, said Malaysia Williams, who worked at its clinic in Huntington, West Virginia, from June 2009 through March 2010. “Nobody stayed there,” she said. “It paid poorly.”

High turnover meant large caseloads, Williams said. Her initial caseload was 120, she said; about a quarter of those files were in disarray. Patients’ positive drug screens — which are supposed to result in their losing take-home privileges — fell through the cracks for some counselors as they struggled to keep pace, she said.

“When you have that much of a backlog it’s impossible to be on top of all the stuff,” she said.

Until recently, there was little difference between the operations of for-profit and non-profit methadone clinics, said Thomas D’Aunno, a professor of health policy and management at Columbia University who has tracked the treatment centers for years. That changed in 2011 survey data, which showed “significant differences,” he said: For-profit clinics had fewer staffers than public clinics.

As Williams struggled to catch up in Huntington, the clinic pushed its revenue up almost 8 percent to $5 million in 2010 — while expenses increased less than 1 percent to $2.6 million, according to state regulatory documents. That January, inspectors found that eight patients in a random sample of 13 hadn’t received the counseling they were supposed to. The company agreed to hire four full-time counselors and a supervisor, records show.

Inspectors reviewed six patients’ charts and found that three hadn’t met with a doctor in more than a year, according to the inspection report — though annual medical screenings are required. Clinic managers pledged to add hours for a doctor and a physician’s assistant, according to the report.

A November 2010 inspection found that nine out of 10 patients hadn’t met with a doctor in more than a year. In March 2011, 16 out of 25 hadn’t. In September 2011, two out of five new patients hadn’t met with a doctor or physician’s assistant weekly, as required, based on the state’s review of clinic records.

Nurtured by government spending, methadone clinics spread nationwide in the 1960s and ’70s until strapped state and local governments began decreasing their outlays. By 2010, for-profit providers controlled 52.8 percent of the 1,200 U.S. clinics.

Over the past seven years, private equity firms have invested more than $2.2 billion in substance-abuse treatment and behavioral health companies in 62 deals, according to PitchBook Data Inc., a Seattle-based research firm.

Addiction-treatment companies are “some of the most sought-after — and valuable — acquisition candidates in health care,” partly because of profit margins that can top 20 percent, according to the Braff Group, a Pittsburgh-based mergers and acquisitions advisory firm.

In fairness, there’s a lot of shady drug-free treatment providers too. I’m on the inside of the drug-free treatment world, but it’s my impression that there problems are much more endemic to the methadone treatment world.

Read the whole thing here.