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Private Investors Eagerly Enter Addiction Treatment Business


Some private equity investors are getting into the business of substance abuse treatment. They're putting big money into building treatment centers, promising to fundamentally change the industry. It's estimated that 22 million Americans need help with substance abuse. Deborah Becker member station WBUR reports on the huge private equity investment behind eight new facilities in the Northeast.

DEBORAH BECKER, BYLINE: The newly formed for-profit company Recovery Centers of America, or RCA, says it plans to become the nation's largest addiction treatment provider. Its first steps toward that involve building these eight new centers, the largest of which is under construction in Danvers, a town just north of Boston.

BRAD GREENSTEIN: I'm Brad Greenstein, CEO of Recovery Centers of America Danvers facility.

BECKER: So right now we're walking through a building that's really been completely gutted.

GREENSTEIN: We demolished 140,000 square feet of interior, and we're starting from scratch.

BECKER: Greenstein says this center will resemble a boutique hotel and will provide inpatient and outpatient treatment, medication-assisted treatment and will follow its patients through the initial stages of recovery. Although RCA eventually plans to build other facilities that will accept those using public insurance, this center will accept only privately insured patients or those who pay out-of-pocket, a population Greenstein says is now underserved.

GREENSTEIN: 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 - are those are the ones that are generally having a hard time accessing care.

BECKER: Much of the funding for these centers comes from what some say is the largest private equity investment ever in addiction treatment - a $231 million commitment from the New York private equity firm Deerfield Management. Leslie Henshaw, a partner at Deerfield, says treatment is generating investor interest for several reasons, namely laws requiring insurers to pay for it and the Affordable Care Act allowing young people to stay on their parents' health insurance until age 26. Henshaw says more investment will ultimately result in better care.

LESLIE HENSHAW: It's an industry that, to date, has had very little accountability with regard to delivering on effective outcomes. And so, you know, we see both an enormous need and an imperative to change the model in which care is delivered.

BECKER: Barbara Herbert is president of the Massachusetts chapter of the American Society for Addiction Medicine.

BARBARA HERBERT: I sort of have that sense of vultures overhead who see a great opportunity to make money but not necessarily in the best interest of my patients.

BECKER: She also says that right now there are no agreed-upon minimum standards for what treatment should be. But Herbert says the metrics that investors use to measure success are often based on profits, which could mean that the more people there are in treatment, the more it's considered a success.

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

BECKER: But some longtime Massachusetts treatment providers say if someone has the insurance or the money, they should use it, and that could free up beds for more patients. Boston University public health professor David Rosenbloom says this new growth in treatment may not only improve care with more oversight, but it could reduce the often long waits to get into treatment.

DAVID ROSENBLOOM: If this is a step toward increasing both the size and the quality and the accountability of the system, then it's a step we have to take.

BECKER: National statistics suggest some 25 million Americans have a substance use disorder, and only about 10 percent of those who need treatment actually get it. For NPR News, I'm Deborah Becker in Boston. Transcript provided by NPR, Copyright NPR.

Deborah Becker