Addiction Treatment Centers Attract Private Equity Investors

The business of addiction treatment is attracting a growing number of private equity investors, NPR reports. The treatment business is estimated to be worth $35 billion.

A New York private equity firm, Deerfield Management, has made a $231 million commitment to fund addiction treatment centers. According to Deerfield partner Leslie Henshaw, investors are interested in addiction treatment in large part because laws are requiring insurers to pay for it. In addition, the Affordable Care Act allows young people to stay on their parents’ health insurance until they are 26.

One for-profit company, Recovery Centers of America (RCA), says it plans to become the nation’s biggest addiction treatment provider. It is building eight new facilities in the Northeast, the article notes.

Brad Greenstein, CEO of RCA’s facility in Danvers, Massachusetts, says the center will provide both inpatient and outpatient medication-assisted treatment. “What we found not just in Massachusetts, but nationwide is this lack of availability for just your average, everyday individual who’s been dutifully paying their insurance premium – that those are the ones that are generally having a hard time accessing care,” Greenstein said.

Barbara Herbert, President of the Massachusetts chapter of the American Society for Addiction Medicine, says she is concerned about investors who see a big opportunity to make money from addiction treatment but do not necessarily have patients’ best interest in mind. She noted there are no agreed-upon minimum standards for what treatment should be.

“I think the biggest metric that you need if you open a new facility is having it full and paid for,” she said. “I’m not saying people are that cynical, but I’m not saying that outcomes necessarily drive investment in this circumstance.”