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Addiction Treatment Industry Blood Bath

Posted on Jul 2, 2018 by Jim Peake

Burnt Bus

Pundits in the addiction treatment field won’t say it, but we will.  There is a bloodbath going on in the addiction treatment space especially in the out of network residential treatment centers.  The MAT (Medically Assisted Treatment a/la Methadone/Suboxone/Vivitrol) side of the business is growing and growing at a rapid pace and this is where the future of the industry is along with in-network treatment.

Since 2017 companies are going out of business left and right.  Others are filing for bankruptcy.  Take a look at the Feds.  Now they are planning on policing the industry.  At the same time there are huge opportunities for the right people in a space that is in flux.  Rehabs can be purchased for pennies on the dollar.  There is a lot of great employees who are available for hire.

In 2017 just a short year ago two large California treatment centers, Solid Landings Behavioral Health who had over $100 Million in top line revenue filed for bankruptcy.  Sovereign Health is another large treatment center was raided by the feds in 2017 and they have consolidated in 2018 as the rehab industry feels the pinch from the government, insurance companies and the marketplace in general.

In 2018 another California headquartered treatment center Elements Behavioral Health have had to file for bankruptcy protection and Florida based Treatment Center of the Palm Beaches also filed for bankruptcy protection.  In 2018 we have seen quite a few addiction treatment centers file for bankruptcy.  Some of the centers because they are undercapitalized and some because they over expanded too quickly and had trouble managing their growth with consistent patient flow.  We expect to see this trend to continue over the next 12 to 18 months into 2019.

According to a June 06, 2018 article in 360dx.com Anthem BCBS has sued a couple of companies including one of the leading rehab billing companies Medivance.  The Feds are very interested in patient brokering and have called out 8 companies and requested information due June 12th 2018.  It will be really interesting to see what comes of this, if anything.  The states and the Feds have been pretty lax overall with the addiction treatment industry.

Even Google is in on the action requiring drug rehabs to get certified to run PPC ads in their Google Ads Platform.  When Google basically killed their Adwords platform for drug rehabs many of the rehabs began to fold up or see their censuses drop considerably.

What you are not seeing are the drug rehabs that are closing 6 -20 bed centers on a regular basis.  Many of the smaller drug rehabs have been closing basically going unnoticed except by the families who have loved ones there and the employees who are required to find new work.

Depending on how this patient brokering inquiry with Congress plays out it could be the single biggest shake up in the rehab industry to date.  They are on the right path with this inquiry but have only scratched the surface.  Congress could put some serious regulations in place or they will do nothing at all.  If they do put regulations in place we expect to see fewer and fewer people receiving treatment.

If you feel that your treatment center is in distress or about to become a distressed asset give us a call we know people who can help before it is too late.  We can assist you with marketing or with finding people who can help with financing.

 

 


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