Late one afternoon in September 2013, Jeremiah Jackson stopped in at his drug dealer’s house to pick up heroin. While waiting around, he checked his voice mail and found a message from American Addiction Centers, a chain of drug and alcohol treatment clinics. An unfamiliar voice said, “Jeremiah, the game is up. It’s time for you to get help.” Jackson just laughed. “It struck me as humorous at first,” he says.
A 28-year-old college dropout, Jackson had been getting calls from American Addiction Centers for more than a month. His mother had passed his name along to several representatives at the company, and they’d call twice a week offering help. The calls were “a buzz kill,” as he puts it, but he sometimes picked up and listened, because he was lonely, he admits, and knew deep down that he had a problem. He’d moved back in with his parents in Sequim, Wash., after losing his girlfriend and apartment but was doing his best to avoid everyone. “It was a horrible year. It was just me, my dealer, and my bathroom,” he recalls. Still, he would end each conversation with AAC by saying he wasn’t interested.
This time was different. Two days earlier, Jackson had almost overdosed on heroin and methamphetamines in a Walmart parking lot. “I woke up on one of those green electrical boxes, and there were all these ambulances and police cars,” he says. “They’d responded to reports of someone screaming. I guess it was me. I had no idea how I got there. … All I had on were my boxers and my shoes. The rest of my stuff was strewn across the parking lot. I was white as a ghost and freezing.”
With that memory still raw, Jackson drove home from his dealer’s place, shut himself into his room, and listened to the latest voice message several more times. “They let me know they cared,” he says. They also noted that he’d be covered by his insurance. When his mom got home that night, he told her he was ready to do whatever it took to get and stay clean. Days later, Jackson shot up one last time and boarded a plane to Dallas, where he was met at the airport by an AAC representative holding a sign with his name.
American Addiction Centers, founded in 2011 and based in Brentwood, Tenn., is run by Michael Cartwright, a former drug addict and alcoholic who says he’s been sober for 23 years. The company owns eight facilities in six states and treats about 5,000 patients annually. In 2013 its revenue was $116 million, up from $28 million in 2011. Last October, analysts say, it became the first business focused solely on addiction treatment to go public, raising $75 million in an IPO. AAC is currently valued at about $588 million. So far, investing in some of society’s most troubled members seems to be paying off: Since October the company’s stock price has almost doubled, from $15 to $28.
“There’s a lot of opportunity in substance abuse,” says Paula Torch, senior research analyst for Avondale Partners, a Nashville-based firm that underwrote the IPO. There are more addicts than beds in treatment centers, she explains, and the industry is highly fragmented, made up largely of outpatient services and mom and pop operations. The market, meanwhile, is estimated to be worth $35 billion, and while almost 23 million Americans suffer from addiction, only about 4.1 million receive treatment each year, according to 2013 data from the U.S. Substance Abuse and Mental Health Services Administration. (The agency says more than 98 percent of those who don’t get treatment think they don’t need it.) In going public, AAC says it hopes to tap that market, fund a nationwide expansion, introduce a consistent standard of care, and create “a national brand” serving all segments of the population. (...)
Treating substance abuse isn’t like other businesses. The clients, by nature, are at a high risk of injury and death, which might expose the business to lawsuits and bad press; addiction treatment is not well understood; and insurance coverage is subject to regulatory changes. Plus, every successful outcome means losing a customer.
American Addiction Centers’ facilities are upscale, though hardly over-the-top luxurious. They cater to people with solid out-of-network insurance coverage. Each client pays about $800 per day, or $24,000 per month, roughly 90 percent of which is covered by insurance providers, according to Cartwright. The company’s profit margin, he says, is about 15 percent. Each facility has doctors and psychologists with expertise in substance abuse, and most have an on-site pharmacy. The company also has its own laboratory in Nashville. The centers, which have a staff-to-patient ratio slightly bigger than 1 to 1, also treat concurrent psychological issues, because as many as 90 percent of AAC’s patients have mental-health disorders, Cartwright says.
A comfortable environment is important for recovery, he adds, scoffing at what he calls widespread critiques that treatment centers, both luxury and lower-end, charge too much and spend too much on looks. “No one would question that, if my grandmother had cancer, that we would treat her in a beautiful facility with good-quality linens and good-quality food,” he says. “Yet a drug-and-alcohol person you put on a cot in the local mission, and that’s quality care? I do still think that there’s a prejudice around this being a moral issue vs. a disease.”
Cartwright guarantees that a patient who checks in for 90 days can come back for free if he relapses. “We were involved in 15 different federally funded research studies, and the common theme that we kept coming back to, over and over and over, is that the best predictor of outcome is length of stay,” Cartwright says. Six months or longer is even better, according to officials with Columbia University’s National Center on Addiction and Substance Abuse. If insurance won’t cover 90 days, Cartwright suggests a patient check into a cheaper facility. “Look, I personally think it’s more important that you get longer-term treatment than it is you come to me.” He argues that insurance companies may actually save money in the long run by covering one 90-day stay with a good outcome, rather than repeated 30-day stays for a patient who’s likely to relapse again and again.
by Caroline Winter, Bloomberg | Read more:
Image: Daniel Shea for Bloomberg Businessweek
A 28-year-old college dropout, Jackson had been getting calls from American Addiction Centers for more than a month. His mother had passed his name along to several representatives at the company, and they’d call twice a week offering help. The calls were “a buzz kill,” as he puts it, but he sometimes picked up and listened, because he was lonely, he admits, and knew deep down that he had a problem. He’d moved back in with his parents in Sequim, Wash., after losing his girlfriend and apartment but was doing his best to avoid everyone. “It was a horrible year. It was just me, my dealer, and my bathroom,” he recalls. Still, he would end each conversation with AAC by saying he wasn’t interested.
This time was different. Two days earlier, Jackson had almost overdosed on heroin and methamphetamines in a Walmart parking lot. “I woke up on one of those green electrical boxes, and there were all these ambulances and police cars,” he says. “They’d responded to reports of someone screaming. I guess it was me. I had no idea how I got there. … All I had on were my boxers and my shoes. The rest of my stuff was strewn across the parking lot. I was white as a ghost and freezing.”With that memory still raw, Jackson drove home from his dealer’s place, shut himself into his room, and listened to the latest voice message several more times. “They let me know they cared,” he says. They also noted that he’d be covered by his insurance. When his mom got home that night, he told her he was ready to do whatever it took to get and stay clean. Days later, Jackson shot up one last time and boarded a plane to Dallas, where he was met at the airport by an AAC representative holding a sign with his name.
American Addiction Centers, founded in 2011 and based in Brentwood, Tenn., is run by Michael Cartwright, a former drug addict and alcoholic who says he’s been sober for 23 years. The company owns eight facilities in six states and treats about 5,000 patients annually. In 2013 its revenue was $116 million, up from $28 million in 2011. Last October, analysts say, it became the first business focused solely on addiction treatment to go public, raising $75 million in an IPO. AAC is currently valued at about $588 million. So far, investing in some of society’s most troubled members seems to be paying off: Since October the company’s stock price has almost doubled, from $15 to $28.
“There’s a lot of opportunity in substance abuse,” says Paula Torch, senior research analyst for Avondale Partners, a Nashville-based firm that underwrote the IPO. There are more addicts than beds in treatment centers, she explains, and the industry is highly fragmented, made up largely of outpatient services and mom and pop operations. The market, meanwhile, is estimated to be worth $35 billion, and while almost 23 million Americans suffer from addiction, only about 4.1 million receive treatment each year, according to 2013 data from the U.S. Substance Abuse and Mental Health Services Administration. (The agency says more than 98 percent of those who don’t get treatment think they don’t need it.) In going public, AAC says it hopes to tap that market, fund a nationwide expansion, introduce a consistent standard of care, and create “a national brand” serving all segments of the population. (...)
Treating substance abuse isn’t like other businesses. The clients, by nature, are at a high risk of injury and death, which might expose the business to lawsuits and bad press; addiction treatment is not well understood; and insurance coverage is subject to regulatory changes. Plus, every successful outcome means losing a customer.
American Addiction Centers’ facilities are upscale, though hardly over-the-top luxurious. They cater to people with solid out-of-network insurance coverage. Each client pays about $800 per day, or $24,000 per month, roughly 90 percent of which is covered by insurance providers, according to Cartwright. The company’s profit margin, he says, is about 15 percent. Each facility has doctors and psychologists with expertise in substance abuse, and most have an on-site pharmacy. The company also has its own laboratory in Nashville. The centers, which have a staff-to-patient ratio slightly bigger than 1 to 1, also treat concurrent psychological issues, because as many as 90 percent of AAC’s patients have mental-health disorders, Cartwright says.
A comfortable environment is important for recovery, he adds, scoffing at what he calls widespread critiques that treatment centers, both luxury and lower-end, charge too much and spend too much on looks. “No one would question that, if my grandmother had cancer, that we would treat her in a beautiful facility with good-quality linens and good-quality food,” he says. “Yet a drug-and-alcohol person you put on a cot in the local mission, and that’s quality care? I do still think that there’s a prejudice around this being a moral issue vs. a disease.”
Cartwright guarantees that a patient who checks in for 90 days can come back for free if he relapses. “We were involved in 15 different federally funded research studies, and the common theme that we kept coming back to, over and over and over, is that the best predictor of outcome is length of stay,” Cartwright says. Six months or longer is even better, according to officials with Columbia University’s National Center on Addiction and Substance Abuse. If insurance won’t cover 90 days, Cartwright suggests a patient check into a cheaper facility. “Look, I personally think it’s more important that you get longer-term treatment than it is you come to me.” He argues that insurance companies may actually save money in the long run by covering one 90-day stay with a good outcome, rather than repeated 30-day stays for a patient who’s likely to relapse again and again.
by Caroline Winter, Bloomberg | Read more:
Image: Daniel Shea for Bloomberg Businessweek
