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Drug Rehabs for Sale: Advice on Buying an Addiction Treatment Center

Posted on Feb 24, 2017 by Jim Peake

Drug Rehabs for Sale: Advice on Buying an Addiction Treatment Center

In the past ten years since 2006, the number of drug rehabs has exploded in the USA to over 30,000. It seems that anyone with a decent sized house and a few extra dollars could open an addiction treatment facility. (Obviously, there is more to it than that, but it is not too difficult to do). Most people entering the drug rehab business have good intentions and aspirations of helping others treat their addictions. We are seeing high-end luxury rehabs and middle of the road rehabs along with IOP’s for sale.

Addiction Rep -- Blog Image -- Advice on Buying an Addiction Treatment Center 1 -- 02-06-17

Impact of Insurance Companies

What we are seeing is insurance companies driving the train so to speak and mandating how the treatment centers will or will not deliver treatment. The treatment centers are almost solely dependent on the insurance reimbursements. For example, if you don’t have a JAHCO accreditation your patients’ insurance will not reimburse you for their treatment. In other cases, if you don’t have a psychiatrist on premises 24 hours per day the insurance might not reimburse you. It is different in different states and with different rehabs and different insurance companies.

Larger Drug Rehab Campus Has Easier Transitioning

With big private equity money moving into the drug rehab space they can afford to purchase the larger facilities. Larger campus type (think assisted living model) drug rehab facilities then have economies of scale; they have one kitchen, one kitchen crew, one furnace, one groundskeeper, one executive director, and etc. If the healthcare system is heading into single payer or “in network” then the out of network PPO policies (which are lucrative) will be harder to land. We predict that the larger drug rehabs will have an easier time of transitioning to an in-network type of an environment because they will have the economies of scale.

Addiction Rep -- Blog Image -- Advice on Buying an Addiction Treatment Center 2 -- 02-06-17

Challenges for Drug Rehab Facilities

Being a drug rehab marketing agency for addiction treatment centers, we see many centers struggle with filling their beds. The hard part is all drug rehabs (and any other business for that matter) need to get impressions of their business in front of influencers or potential clients.  Unfortunately, this costs money. They either have to pay salespeople or a marketing team and buy media, or it will be difficult to reach customers.

At the end of the day, cost per client acquisition can be in the thousands of dollars. With drug rehab acquisition costs steadily rising it makes it more challenging for the smaller players to keep pace. The next conversation for the smaller guy is: “do you know any investors?” The answer is, “yes.” Because of our position in the marketplace we are in, we know where the buyers are and where the sellers are. We like to try and assist both parties because it is good for our overall business.

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