Is the $35 Billion Rehab Industry Ready for a Disruption?

By Mandy Stadtmiller, The Daily Beast

20 November 17

In today’s recovery industry, what many people think of as ‘rehab’ is about as far from the prestigious environment of the Betty Ford Center as you can get.

he rehab industry needs to be disrupted the same way Uber disrupted the taxi cab industry,” says treatment reform advocate and Hollywood producer Scott Steindorff, who is working with other leaders in the industry to modernize a field currently engulfed in crisis yet still entrenched in often-irrelevant-to-opioid-addict principles developed in the 1930s from the founders of Alcoholics Anonymous.

“I’m 34 years sober, incredibly connected in the recovery world and when I was asked three months ago, where should I send my nephew, I said, ‘I don’t know.’ Because rehab doesn’t work. You’re taking a lot of money, giving a lot of people a lot of false hope and what I have found consistently across the map is a high failure rate of people staying sober after rehab.”

What does a prominent rehab spokesperson have to say about these incendiary claims? Responds Nick Motu, vice president at the Hazelden Betty Ford Foundation, the nation’s largest non-profit treatment organization: “Well, you have to define what failure is—for instance, if you define failure as a relapse. But that’s not how we define failure. Relapse can be part of the disease process, and unfortunately like any other disease, relapses will happen. However, we strive for abstinence. That’s our ultimate goal.”

In today’s recovery industry, however, what many people think of as “rehab” is about as far from the prestigious environment of the Betty Ford Center as you can get. Unspeakable horrors abound: In May, a drug-treatment provider named Kenny Chatman received a 27 ½-year sentence for turning his patients into prostitutes, engaging in human trafficking, arranging rapes from paying customers and allowing anyone to do drugs in his “sober homes” as long he could keep bilking insurance companies for millions of dollars. The father of one of his victims called Chatman “worse than a pedophile.”

With no experience in drug treatment, Chatman opened his first sober home in 2012, and Florida’s Department of Children and Families allowed him to open a second treatment facility last year. Unwittingly, Chatman’s lawyer Saam Zangeneh articulated a defense for his client that neatly summarizes the crisis the addiction treatment industry currently faces nationwide: “He walked into an industry that is infected. He became another infected member.”

But can the bloated-by-fraud, saturated-by-shady-marketing, corrupted-by-billions-in-funds rehab industry—sick and in crisis—ultimately find the recovery it needs?

That remains to be seen. But for now, identifying what many outsiders have no idea is even happening (and thereby fall victim to because of their lack of knowledge, when say, a loved one needs treatment) is at the very least a start.

• Most central to the disruption underway, the opioid epidemic has now reached historic proportions, claiming 91 lives a day and causing an estimated 142 overdoses daily. For perspective, consider what Mark Chalos, a lawyer counseling Tennessee counties considering lawsuits, told Governing.com about the extent of the problem: Some places can no longer afford the autopsies for every death that might be an overdose, so he surmises the official count “is just the floor.”

• More than 100 states and cities are now suing the drug companies and distributors that have introduced opioids into the market (with the National Institute on Drug Abuse estimating that 75 percent of people who enter treatment for heroin first took an opioid legally from a doctor’s script). These civil cases argue the marketing is deceptive, with not enough clarity as to how addictive pills can be. Drug companies refute these claims saying they have taken steps to prevent addiction and fight overdoses. Purdue Pharma gave a statement to NBC News saying, “We are an industry leader in the development of abuse-deterrent technology, advocating for the use of prescription drug monitoring programs and supporting access to Naloxone—all important components for combating the opioid crisis.”

• Medication-assisted-treatment is changing the playing field, but still faces stigma. While President Donald Trump is being criticized for his toothless “national emergency” announcement, Food and Drug Administration Commissioner Scott Gottlieb is being praised for supporting expansion of long-term medication-assisted treatment that wards off opioid-specific withdrawal. (This science-based, non-AA-focused approach is an acknowledgement that the half a million opioid deaths over the last two decades often require a different medication-backed solution beyond just a “Higher Power.”)

• The Affordable Care Act and the Mental Health Parity and Addiction Equity Act has completely upended the business model of many old-guard institutions, with formerly cash-up-front-driven centers like Betty Ford now rarely finding clientele who want to pay out of pocket. The result? Less money coming in because insurance companies notoriously provide less payment for services by negotiating price points. This has led to one-time untouchable rehab institutions such as Hazelden Betty Ford (the famous Betty Ford Clinic merged with Hazelden in 2014), announcing job reduction last month as they adapt to the new financial landscape.

• But perhaps most disruptive (definitely the most shocking) in rehab headlines of late, horrific scandal after horrific scandal has continued to plague the treatment industry—particularly in Southern California, which earned the nickname “Rehab Riviera” in a groundbreaking series by the Orange Country Register—and in South Florida, where the Palm Beach Post exposed the “Gold Rush.”

“A lot of bad players are sucking up as much business as they can and putting people through the revolving doors of treatment,” observes rehab reform advocate Ryan Hampton. “It used to be, ‘You want to go to treatment? Let’s go to Betty Ford.’ Now there are thousands of options to go to. It’s a cesspool. Nobody knows if they’re going to a good place or not. It’s insane, and it’s sad, and it’s just the Wild, Wild West.”

When asked if these problems are a pressing issue for Hazelden Betty Ford, spokesman Motu said “Absolutely. We have witnessed first-hand some of the issues, and it’s not fair to the consumer, and that’s ultimately who we’re trying to protect here. It is a concern that people’s experience at some of these facilities is not a quality experience, and as a result, their recovery is inhibited and sometimes fails. And failure can either be a relapse or they can die.”

While the Betty Ford Center has experienced its fair share of upheaval over the years (from infighting to merger to more recent credit rating changes), Motu says that the foundation is now in more of a “transition” than a disruption at least for their 16 facilities nationwide —which are seeing positive results from efforts such as medication-assisted treatment.

“We have a program called Cor-12 that we started about four and a half years ago and preliminary results show that after six months, 72 percent of the patients that are involved in that opioid addiction treatment program are abstinent,” Motu says. “So we feel we’re delivering great value.”

Rehab veterans say they do not recognize the industry they see today.

“I went to rehab in 2000, and it saved my life,” says Anna David, New York Times bestseller author of six books about recovery and CEO of lighthustler.com, which helps people tell their stories about getting clean.

“I would not be sober without rehab. That’s what led me to AA, and I would not be sober without AA. That is not the experience of many people I know who leave rehab today because the industry is so rife with immorality. I think what happened is that many people who went to rehab got 30 days of sobriety, realized how much money people were making and then got the bright idea to start their own rehabs. Some of these are good people. Some are in it purely for the money, and that's corrupted everything.”

Rehab recovery leader Brad Lamm, who created the “Fair Care Promise” to provide an ethical pledge for treatment providers on his website intervention.com, points to how the challenging environment the Hazelden Betty Ford Foundation now faces is representative of the disruption currently underway for the greater industry.

“They operated under this old-school model,” Lamm says. “They had excellent care. They had an excellent figurehead in Betty Ford. They didn’t do a lot of marketing. She was very involved in the alumni so they had all these little disciples all over the world where clients were coming in. It was world-class, all-cash pay. What they did worked for a long time, but everything has changed.”

It’s not that Hazelden Betty Ford is now declining in quality of care—but like so many other players in the treatment industry space, they are dealing with what rehab reform activist Hampton calls a “perfect storm” of circumstances affecting the industry.

• First, the Affordable Care Act and “Parity” (as it is commonly shorthanded) means a lot more insurance dollars are available for addiction. On the other hand, for facilities such as the Betty Ford Center, once flush with thousands of out-of-pocket dollars for rehab, insurance dollars are more hard-won monies than in the past when patients forked over several tens of thousands of dollars without any insurance haggling required.

• Second, specifically in California (where the original Betty Ford Center is based), there is access to insurance almost instantly thanks to “Covered California.”

• Third, more people are in need of treatment than ever before thanks to the opioid crisis, with 2 million Americans addicted to prescription opioids and at least 1 million to heroin, according to the Centers for Disease Control.

• Fourth, the $35 billion rehab industry is increasingly being exploited by individuals who are taking advantage of those who need help the most. (For an excellent glimpse into these issues, the 2015 documentary The Business of Recovery lays out a chilling case for a broken, ailing, desperately in-need-of-its-own-rehab rehab system.)

Motu agrees all four challenges are affecting Hazelden Betty Ford’s changing scope of care, including the “unprecedented demand” as the opioid crisis worsens. He says about 40 percent of patients of about 7,000 annually now coming in for residential care face some kind of opioid use disorder. But the biggest issue the foundation faces, Motu says, is in having to “seemingly overnight” adjust to the rapid-fire insurance utilization model for care. He acknowledges: “I would say we are finally catching up with the mainstream business models. We were an outlier for many years because it was self-pay.”

Now that the majority of Hazelden Betty Ford’s clientele is covered by insurance, it has led to inevitable belt-tightening measures, Motu says, although not in the realm of patient services. Indeed, when it comes to patient care, their facilities are at currently at between 90 and 95 percent capacity.

“However, in order to treat more people, we had to go to where their funding sources were, and more and more, that is insurance,” he says. “Most people coming to us, 93 percent, are covered by insurance, and as a result, we have to craft contracts with those insurance companies that essentially offer our services at a discount… So yes we have had to tighten up our ship… But the demand for our services is growing at a very aggressive clip… The demand is not waning. In fact, it’s growing.”

One downside to the rehab industry’s growth spurt nationwide is that oversight is so limited.

While 29 states have rehab reform legislation in place (including licensure and prohibition of patient brokering where facilities pay a referral fee to “junkie hunters”), SB636, a bill proposed to address the issue in hard-hit California is stalled—even as the state is increasingly not just facing disruption, but often utter chaos. (Motu says that Hazelden Betty Ford favors California’s proposed legislation—indeed any legislation—that begins to tighten the regulation around California treatment providers.)

Activists such as Hampton are determined to fight California’s current stagnancy in rehab reform. Working with Recovery Reform Now, he is supporting their just-announced push to put pressure on the California legislature in January to introduce a legislative package the same way that Florida did on a massive scale recently, including moving patient brokering from an insurance violation to a RICO act.

“I got led into this as a result of a lot of my friends being brokered,” Hampton says. “I’m seeing my friends traded like horses and their insurance plans being left for carcasses, and I was like, ‘Oh my God, what is going on here?’ And it’s completely legal in California.”

As an activist determined to bring attention to the opioid crisis, he tells his story as an example of how the epidemic can affect anyone who’s ever visited a doctor’s office.

In 1999, Hampton had a bright future in politics and a great job working for the Clinton administration. Four years later, an ankle injury led him to receive a doctor’s prescription for Oxycodone. This resulted in a decade-long path of addiction where he was eventually cut off from legal opioids because he was placed in a drug-seeking registry. It took him only an instant to decide he would turn to street heroin to ease the all-consuming, brain-hijacking craving of opioid withdrawal.

Now three years sober, Hampton cautions people to be wary of the new treatment options they may find via a simple Google search, while positioning the Hazelden Betty Ford Foundation as a “glimmer of hope” in an increasingly sleazy industry driven by profit over patient.

“Bad actors in the treatment industry have popped up literally overnight,” Hampton says. “Recently, we’ve seen Florida crack down on it. Massachusetts has cracked down on it, but now what has happened is that because California is so lax and the laws are so outdated when it comes to addiction treatment marketing, many of these shady operators have taken up shop in California, and Betty Ford—which runs a very ethical program—is having to compete with an industry where there is this massive patient brokering going on with people being traded like horses, there is dishonest marketing and sober living centers are popping up overnight and sometimes being run by convicted felons who have a history of insurance fraud.”

Disruption is necessary to adapt and thrive in an increasingly troubled industry, and at the heart of it all lies one essential contradiction.

“There are no regulations,” Hampton emphasizes, “and at the same time, the demand for treatment is so high.”