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Unread 05-15-2012, 11:56 AM   #1
surfsupl
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Default CRC Treatment . Sacrificing care for profit ?

CRC, run by Mitt Romney's old company, is the largest rehab operator in the world. With 30,000 patients a day—and growing—can it still offer effective treatment?


In the handbook of private equity investing techniques, few make more intuitive sense than the “roll-up.” Borrow some money, buy up small players in a fragmented industry, cut costs, find synergies, juice profits, increase multiples, pay down debt, and sell at a profit. Financial operators have done it well in waste management, funeral homes, and advertising. Now Bain Capital (yes, the company that clean-living Mitt Romney used to run) is trying to consolidate an unlikely industry: addiction treatment centers.
In February 2006, Bain purchased an outfit called CRC Health Group for $723 million and proceeded to go on a shopping spree, snapping up nearly 20 new facilities over the next two years. The company took a breather during the financial crisis, but in 2011 resumed its buying binge with the purchase of some smaller treatment centers.
CRC’s critics contend that the treatment company has been sacrificing care for profit. The company itself says its goal is building.
Rehab, it turns out, is a pretty good business. CRC’s flagship facility, Sierra Tucson in Arizona, charges upwards of $30,000 for a 30-day stay. And with Hollywood and the sports world providing a seemingly endless supply of customers (Sierra Tucson has treated Michael Douglas, Ringo Starr, and Tiger Woods, among others), there’s growth potential too. But is the addiction-treatment industry one that benefits from scale? Is rehab roll-up-able?
In the most basic sense, the answer is yes. CRC, which treats some 30,000 patients a day at its 140 facilities, is able to save by sharing equipment like computer software and buying supplies in bulk—typical consolidation stuff. CRC’s total revenue last year climbed to more than $450 million, from $271 million in 2006. And its profit margin of 25% in 2010 is several multiples higher than CRC’s smaller and less-earnings-oriented competitors. (The industry consists of for-profit institutions and nonprofit centers such as New York’s Phoenix House.)
But CRC says consolidation is allowing it to be more innovative with patient care. It is able to collect and analyze data that would be unavailable or not statistically meaningful with a smaller base of patients. Dr. Phil Herschmann, CRC’s chief clinical officer, oversees a group of 20 clinicians who have no front-line responsibilities; instead they visit the company’s 140 facilities in 25 states in search of best practices they can then apply system-wide. Some of those practices are about cost containment, of course, but others focus on treatment, recruiting, and managing counselors.
CEO Andrew Eckert suggests that CRC’s size could also help more addicts get the treatment they need. He notes that even the largest of its competitors—such as Hazelden or Elements Behavioral Health (owner of Promises)—may have only 10 or 20 sales representatives in the field, while CRC has more than 150 people peddling their services to clinicians, corporate HR departments, courts, and even families, who in turn can refer people in need to CRC.
But CRC’s critics contend that the treatment company lately has been sacrificing care for profit. (Romney’s presidential bid has put Bain smack in the middle of a debate over whether private equity firms help build great companies or merely bleed them dry before selling them off.) The family of Dr. Kenneth Litwack, 71, a patient who disappeared from his quarters at Sierra Tucson last August only to be found dead two weeks later behind the facility’s horse stables, has launched a wrongful-death suit against CRC and Sierra Tucson. “Well-regarded hospitals with talented and -dedicated staff are squeezed by the new CRC ownership, who focus on revenue over care,” says Dev Sethi, a lawyer representing the Litwack family.
There have been other alleged instances of questionable care or patient oversight that have resulted in death (one patient in an ambulance en route to a hospital, another in the swimming pool at Sierra Tucson), as well as lawsuits, and sanctions, fines, and suspensions at the state level. But even setting aside occasional tragedies—which are hardly unheard of elsewhere in the rehab world—there are those who think that the combination of growth and profit will never be the best way to approach addiction.
“CRC uses a cookie-cutter approach,” says Dr. Howard C. Samuels, an addiction specialist and licensed practitioner based in Hollywood. “It’s the assembly line of recovery.” Samuels, who founded the Malibu outpost of Promises and now runs his own 14-bed facility, The Hills Treatment Center, says that he used to refer patients to CRC, but ceased doing so when he felt that bureaucracy and the bottom line had overwhelmed concern for individual treatment.
CRC executives argue vehemently that the small number of unfortunate incidents is not unusual for an industry that deals with such acutely at-risk clients as alcoholics, drug addicts, and troubled teenagers. And they categorically deny having chosen profits over their patients. “In my 15 months at this company, the topic of Bain Capital ‘exiting’ at some specific level of profit has never come up,” says Eckert. “They’ve already owned us for six years, which is longer than normal in private equity. And we are all in agreement that the goal is to build this company, not squeeze it for profits.” Patients and their families surely hope that is the case; greed is one addiction for which there is no easy cure.
Duff McDonald is a contributing editor at Fortune magazine. His work has also appeared in Vanity Fair, New York, WIRED, GQ and Newsweek. He's the author of Last Man Standing—a biography of JPMorgan Chase chairman and CEO Jamie Dimon—and of an upcoming history of McKinsey & Company, to be published by Simon & Schuster in 2013. This story also appears in the April 30 issue of Fortune magazine.
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Unread 05-15-2012, 06:31 PM   #2
OhioMike
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If you are fortunate enough to afford private care, then you are fortunate enough to be able to seek care elsewhere if you are not happy with your provider. Profit in medical care of any kind certainly isn’t new and to find those who skimp for the sake of profit isn’t new either in any industry. That is why we have the freedom of choice to change providers.

How about a real crime and crying shame! …… The public funded recovery circus! …. Point and case the local recovery treatment centers here in Central Ohio run revolving door programs based on detox and public funds. The run them through and ship them out as fast as they can get them, only to repeat the process with the same patients many times over, at the expense of the tax payer. If a patient catches on and demands better care and treatment they are left holding their own hot air and it is not available and frankly doesn’t serve the purpose of keeping the public funds coming at record rates.

When Suboxone came along even those in the greatest denial of what was taking place for decades at the expense of tax payers could see the writing on the wall as they demonstrate simply some of the worse Suboxone programs in the nation, with the end result being the same, the revolving door syndrome.

The patient in desperate need of quality care gets screwed, the tax payer gets screwed, but, the staff and administrators continue to benefit and grow!

If it happens here, we all know it happens in each city and county. Unlike those dealing with private care these poor souls have no choice; they are in the government system and at their mercy. They cannot control their own recovery; they cannot control their own system.

I see them every single day, every day of each month of each year. The story never changes and the government ran system continues to keep them at a disadvantage so others can benefit.

Have doubt? Come visit me, I’ll take you on tour! …… Sad, very, very sad indeed.

Mike
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