More Investors Pour Money Into Rehab Centers As Health Reform Increases Coverage

Operators of rehab centers are seeing an influx of funding from investors as more Americans receive health care coverage for addiction treatment under the Affordable Care Act, Reuters reports.

The investment boom is triggering a consolidation of rehab centers. Treatment of drug addiction and alcohol abuse are considered “essential health benefits” that most health insurance plans must offer under the Affordable Care Act. Many Americans who previously could not afford addiction treatment now are eligible for coverage. The law also permits young adults to stay on their parents’ insurance plan until they are 26, which expands coverage to those who are struggling with substance abuse. More people can also afford coverage now that the economy is recovering, the article notes.

The market for addiction services has grown to $35 billion a year, from $21 billion in 2003. Investors include Goldman Sachs Group Inc’s private equity arm and investment banking boutique Brentwood Capital Advisors.

In 2013, 22.7 million people ages 12 or older needed treatment for an illicit drug or alcohol use problem, but only 2.5 million received treatment at a specialty facility, according to the 2013 National Survey on Drug Use and Health.

There are more than 14,500 specialized drug treatment facilities in the United States providing care for substance use disorders, Reuters reports. Currently the industry is very fragmented, with even the largest operators owning no more than several dozen treatment centers. The average facility has no more than 150 beds. Investors are eager to consolidate facilities to increase efficiencies of scale and profits. They are most interested in facilities that focus on patients who can pay through private insurance or with their own funds, instead of relying on government programs.

13 Responses

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    Jose Feliz

    October 5, 2016 at 10:58 AM

    After reading every post on this subject, I will first say who I am and because I have groundwork to leave this comment, I have 50 years of which I have 35 having battled addictions from three angles, as anti-narcotics agent, as an addict and then as part of a treatment center.

    Just as the drug problem is international, likewise the solutions have to be international, and a few years ago the addiction as a disorder mental health, was recognized the problem is that there are costs relating to benefits and not to the recovery of the patient while the problem of addition is seen as a way of further enriched and not to save lives, the owners of treatment centers will be the same as the drug cartels, MONEY, MONEY, MONEY, regardless of lIVES lIVES lIVES.

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    william waldren

    September 30, 2015 at 10:16 AM

    I have been to a “For-Profit” rehab center and I am very thankful it exists, as it save my life.
    Sure, there are always bad seeds in any industry however, to put down all rehab centers based on the “bad seeds” is unfortunate and discredits those institutions that do good.

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    B Nowak

    December 18, 2014 at 11:06 AM

    Fighting the system and insurance companies over the years when our son was suffering from co-occurring disorders and now to read this, He didn’t make it and died in 2005. I’m absolutely sickened by the for-profit nature of this. Money would be better spent educating the medical community and so-called professionals, as well as enlightening rehab centers. Been there, done that. Throwing $$ at it isn’t a solution. It only feathers the nest of those who really don’t give a damn.

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