From Diversifying Services to Acquiring Patients: How SUD Executives Are Navigating Industry Growing Pains

Certain sectors of behavioral health care are still “growing up.”

For example, some industry insiders have said the autism therapy industry is in its toddler phase. The SUD industry, meanwhile, is working to shed some of the associations of its youth and enter a more adult era of addiction treatment.

Some providers are modernizing their practices by implementing novel technologies, offering medication-assisted treatment, or expanding care continuums. Others are forging new relationships with payers and other SUD providers to diversify revenue streams and services.

Modernizing an SUD treatment business cannot be accomplished with a one-size-fits-all approach, I learned at the Behavioral Health Business Autism & Addiction Treatment Forum. Providers across the board are trekking different paths, but most are seeking to find the same vista at the end of the trail: destigmatized, evidence-based, accessible SUD care where payer contracts help, rather than hinder, getting patients into treatment.

In this BHB+ Update, I share key takeaways from the Forum, including the challenges that keep SUD executives up at night and the strategies many providers are implementing to overcome these hurdles. Among the topics I explore:

– Diversifying services and revenue streams

– Patients’ need for services and the costs of getting patients into care

– Overcoming stigma and collaborating with fellow providers

Supply, demand and patient acquisition

There is one thing that nearly every SUD provider seemingly agrees on: The need for SUD treatment services is only increasing.

The opioid overdose crisis continues to devastate Americans, with 81,806 people dying from an opioid-related overdose in 2022. That’s an increase of more than 30,000 deaths from 2021.

A key driver of these deaths has been fentanyl, which requires higher doses of medications for opioid use disorder (MOUD) to treat than drugs like heroin and which sparked the “third wave” of the opioid crisis.

Despite high levels of need, people with SUD largely do not receive treatment. In August, the Substance Abuse and Mental Health Services Administration (SAMHSA) reported that almost 96% of Americans aged 12 and up with SUD have not received treatment.

“Come to an OTP [opioid treatment program] clinic and you see people early in the morning who are, in some cases, waiting in line to get inside,” Dr. Nasser Khan, chief operating officer of Acadia Healthcare (Nasdaq: ACHC), said at the Forum. “I’d ask you, other than when there’s a new iPhone release, where do you see people standing in line to get into a place, never mind a health care setting?”

Franklin, Tennessee-based Acadia operates more than 250 behavioral health facilities in 38 states and Puerto Rico. The company has placed special emphasis on its comprehensive treatment center (CTC) business, which provides OUD treatment, in recent years.

While lack of need is not an issue for SUD providers, executives’ opinions begin to diverge on the topic of patient acquisition. Patients may be lining up for treatment in some cases, but the costs associated with acquiring them negatively impact some providers.

Increased reliance on digital advertising, coupled with overall rising social media advertising costs, can place a higher financial burden on providers.

“Acquiring that patient is definitely a challenge, and it changes the way that we admit new patients,” Maks Danilin, CRO of Guardian Recovery, said.

Delray Beach, Florida-based Guardian Recovery provides SUD care and mental health services from more than 12 locations.

Increased focus on digital advertising has required providers to rethink their acquisition tactics to meet rising costs. One technique to tackle the costs of patient acquisition is to diversify services, creating more pathways for patients to enter treatment.

For Andrew Rothermel, CEO of Jackson, Mississippi-based Defining Wellness Centers, offering treatment for co-occurring disorders, including mental health, generates a significant number of new patient leads. If Defining Wellness Centers became a pure-play SUD provider, Rothermel said, the provider’s cost of acquisition would “go way up, and it just wouldn’t be financially viable.”

Defining Wellness was acquired by Fulcrum Equity Partners in 2023 and is planning to grow outside of the state of Mississippi.

Diversifying services may come with its own costs.

“We underestimated the acquisition costs of some new customers outside of our traditional customer paths.” Robert Poznanovich, chief business growth officer at Hazelden Betty Ford Foundation. “The cost of Dr. Google is something that really needs to be taken into consideration because it was beyond our expectations on what the cost was in today’s world to find a patient.”

Nonprofit SUD provider Hazelden Betty Ford is headquartered in Center City, Minnesota, and operates 17 treatment centers.

The fox and the hedgehog

Beyond the patient-acquisition point, expanding service lines can often improve outcomes, ease staff acquisition, make providers more attractive to payers and increase revenue.

“From an efficacy of care perspective, it makes sense,” Jeremy Klemanski, CEO of nonprofit SUD provider Gateway Foundation, said at BHB’s event. “From the perspective of people getting [care], it makes sense. In terms of where we think payers are headed in the future, it makes sense.”

Chicago-based Gateway provides SUD and mental health treatment across eight states.

But more behavioral health leaders are starting to question whether the one-stop-shop approach is right for them.

In fact, some are using the growing diversification trend to stand out among their competitors as an SUD specialist. It’s a little bit like the fox and the hedgehog parable: “The fox knows many things, but the hedgehog knows one big thing.”

For example, John Driscoll, CEO of Caron Treatment Centers, said Caron is taking a hedgehog approach to SUD care.

“We’re going to double down on substance use disorder and begin trying to up the science of assessment, measurement of outcomes and care, [and] focusing on the origin of the disease, which is the brain,” Driscoll said.

Wernersville, Pennsylvania-based Caron is a nonprofit organization that provides SUD services in Pennsylvania, Florida, Washington, D.C., Georgia and New York.

Cooper Zelnick, chief revenue officer at Groups Recover Together, similarly said that his organization is focused on delivering incremental services to improve engagement, retention and abstinence than it is on expanding service lines.

“Our view is we want to do what we do best, and when it comes to inpatient or [partial hospitalization programs] (PHP), even [intensive outpatient programs] (IOP), we like to partner with amazing providers in the continuum,” Zelnick said.

Woburn, Massachusetts-based Groups Recover Together provides MOUDs and virtual or in-person group therapy, largely through value-based arrangements.

It’s clear that SUD providers will have to determine where they fall on the topic of a “complete continuum of care.” It seems that there are two main paths: building out service lines in house, or maintaining focus on core offerings while forging strategic partnerships to allow patients to easily step down through the care continuum.

Diversifying with payers

While many providers are diversifying service lines, some are seeking to vary their payer contracts.

The SUD industry has connotations with expensive, luxury rehab facilities with services often paid for out of patients’ pockets. Providers have pivoted to seek to make treatment more accessible, developing contracts with many major payers to allow patients to use their insurance.

To further enhance accessibility, some providers are moving to forge relationships with Medicaid and Medicare plans. Medicare and Medicaid populations are disproportionately impacted by SUD, but very few beneficiaries access treatment.

Groups Recover Together has approximately tripled its Medicare business in the past 18 months, according to Zelnick, an increase that was eased by CMS’ increasing support of outpatient addiction treatment.

Hazelden Betty Ford Foundation is also seeking to expand into Medicare to help solve problems with SUD among aging populations, Poznanovich said.

Medicare expenditures were estimated to be $851.9 billion in 2023, according to the CMS Office of the Actuary’s most recent report on federal health care spending. Over the next 10 years, that’s projected to grow to $1.33 trillion.

Among the major payers, Medicare has the highest projected 10-year average spending growth rate, mainly because of enrollment into the program, with several thousand baby boomers turning 65 each day.

Some providers have already specialized in working with government health plan beneficiaries. Around 85% of Portland, Oregon-based Boulder Care’s patients receive health benefits from Medicaid. Boulder provides virtual SUD care in 15 states.

Relationships with government health plans are not a fit for every provider. For instance, Danilin said that Medicare plans were too restrictive for Guardian Recovery.

Providers are increasingly leveraging outcome tracking to negotiate contracts with new payers and improve reimbursement with existing payer contracts. I anticipate that providers consider if expanding payer contracts is right for their business.

Diminishing stigma, forging relationships

One of the refrains of the Forum was the persisting issue of stigma. Some providers noted that stigma has decreased in recent years, but many made clear that the issue persists in keeping patients from accessing care.

Misconceptions about evidence-based MOUDs, for example, can prevent people from starting buprenorphine or methadone treatment, which can have fatal consequences.

Stigma’s call is, at times, coming from inside the house. Health care providers are, at times, guilty of using stigmatizing language when discussing SUD, Khan said.

Among other preconceived notions that SUD providers must reject is the idea that keeping industry secrets is the best way to operate.

Several providers have noted that they maintain open channels of communication with neighboring providers, but others have noted that this approach is not universally adopted.

Jason Kletter, president of BayMark Services, said he identified something akin to rivalries among providers of different types of specialties, whether it be MAT versus abstinence or residential versus outpatient.

BayMark operates more than 300 SUD facilities in 34 states.

“I’m concerned about the field infighting, our lack of ability to coalesce around the need for improving quality and educating the general public and getting those people who are not in treatment into treatment,” Kletter said.

As the SUD industry matures, providers will increasingly look to each other for advice and best practices. If not, industry-leading ideas may get stuck at the drawing board and inhibit the expansion of accessible, evidence-based care.