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Unsavory Practices in the Addiction Treatment Industry

Unsavory Practices in the Addiction Treatment Industry

Since Counselor’s primary objective is to provide our readership with tools to be more effective addiction and mental health counselors and therapists, we rarely venture into today’s most pertinent issues affecting all of us who work in this industry. This is an exception.


We are compelled to comment on the volatility in our field, specifically addiction treatment. As we go forth each day, doing the best we can for our clients and patients, it is near impossible not to be affected by the strife reflected in today’s alarming news headlines:


  • “FBI Agents Raid California Health Care Company”
  • “Rehab Centers: A Get-Rich Quick Scheme”
  • “South Florida: Multiple Arrests for Fraud, Patient Brokering”
  • “Opiate Overdose Deaths Quadrupled Since 1999”
  • “Pharmaceutical Industry Investigated for Prolonging Opiate Epidemic”


With the enormous growth of the treatment industry—now estimated by Forbes magazine at $35 billion dollars per year, up from $21 billion in 2003 (Munro, 2017; Sforza, 2017)—a myriad of financial abuses have been uncovered. Like any “gold rush,” the greedy and the cunning have been attracted and are in full force.


We are not talking “fake news” here.


The various financial opportunities presented by addiction treatment can be problematic. A MarketAlert brief for investors described financial risk in the recovery business this way:


It’s not all kittens and rainbows. As we have seen countless times in other frenzied health care sectors, when the money flows in, so do the ne’er-do-wells, which can bring the sector the kind of attention it doesn’t want. Markets in hyper-drive are extremely fragile. And sometimes all it takes to bring a high-flying sector crashing to the ground are a few, high-profile cases of chicanery that paints the entire industry with a broad brush of suspicion (and in a sector sorely lacking definitive data to quantify the good work you do, the industry is particularly vulnerable) (The Braff Group, 2014).


With overdose deaths have quadrupled since 1999 (Sforza, 2017) and mandated addiction treatment coverage under the Affordable Care Act (ACA), many have recognized that there is money to be made. An investigative report in the highly-regarded Orange County Register, based in Newport Beach, California, provides an eye-opening overview of recent trends, and quotes several industry leaders:


Investors are attracted because the business of addiction treatment is so fragmented and ripe for modernization; in the world of health care, size matters . . . more sophisticated operations can allow for investment in technology and data-mining that may better manage health and financial outcomes. . . . consolidating addiction treatment companies are reaping the benefits of “vertical integration,” what happens when websites, call centers, rehab facilities, drug-testing labs, and sober-living homes are all gathered under one corporate roof, capturing all that spending for the same corporate family.


The for-profits issue warnings about the future: Growth has been fueled by hundreds of millions of dollars in new acquisitions made possible by big borrowing, and the substantial debt could cause problems if the economy stumbles. There’s a great deal of uncertainty around Obamacare’s survival. Insurance companies are pressuring addiction treatment providers come in-network, which costs insurers less and may decrease revenue growth for providers (Sforza, 2017).


There have been lawsuits and investigations which could impact the business, and the market itself has been volatile.


Mark Mishek, president and CEO at the Hazelden Betty Ford Foundation, one of the oldest, most established nonprofit treatment chains in the nation, stated, “The black-hat marketing techniques, an incredible amount of fraudulent billing, payment for patient referrals, self-referrals, fraudulent work in drug testing—it’s all there and it’s terrible. If you ever did that in the real world of health care, you’d go to jail. It’s fraud” (Sforza, 2017).


The Register also reports on The Southern California News Group’s recent investigation, which found the industry “peppered with financial abuses that bleed untold millions from public and private pockets, can upend neighborhoods and often fails to set addicts on a path to sobriety. Lax government regulation and widely-divergent treatment approaches have meant poor care for many. The revolving door between detox centers, treatment facilities, sober living homes and back again generates huge money for operators who know how to game the system” (Sforza, 2017). 


Then there is “the role that pharmaceutical companies played in creating and prolonging the opioid epidemic. The probe, which is led by AG offices in Washington, DC and Tennessee and includes the majority of states, will focus on whether the marketing and sale of prescription painkillers was unlawful” (Lurie, 2017). Washington, DC, Pennsylvania, Massachusetts, Vermont, Illinois, Texas, Georgia, Connecticut, South Dakota, Rhode Island, Alabama, Virginia, Wisconsin, Tennessee, Colorado, Indiana, Delaware, Iowa, North Carolina, Oklahoma, New York, and California are all participating in the investigation. 


Rebecca Flood, long-time executive director and CEO of New Directions for Women, adds a strong voice to the discussion. With forty years in the industry, Ms. Flood remains passionate about getting our industry back on track, and she encourages other good players in the business to get individuals from insurance carriers, the community, and reputable, licensed, certified, and accredited providers to come to the table together, to stay in the solution, and hold ourselves accountable. She reminds us,


There are many good people in our field, including addiction treatment providers that have been around for decades, are reputable and accredited, and remain driven by the mission of helping to save lives. There are good communities that welcome healthy providers and want to ensure they are doing good work with the right intentions. There are insurance carriers that do want to help save lives, however don’t understand substance use disorders enough to know the intensity or duration of time that is really adequate to help someone on a lifelong pathway to recovery (Flood, 2017).


We all need to remember that not everyone is a culprit. The heart of the industry is equitable, fair, and compassionate.





The Braff Group. (2014). A peek inside American Addiction Centers’ initial public offering: Implications for the industry. Retrieved from http://www.thebraffgroup.com/Articles/articlespdfs/MarketALERT/MA_BHSS_Fall2014.pdf
Flood, R. (2017). Coming together the get rehab industry back on track. The Orange County Register. Retrieved from http://www.ocregister.com/2017/06/16/coming-together-to-get-rehab-industry-back-on-track/
Lurie, J. (2017). A giant coalition of states is investigating opioid manufacturers. Retrieved from http://www.motherjones.com/politics/2017/06/a-giant-coalition-of-states-is-investigating-opioid-manufacturers/
Munro, D. (2017). Inside the $35 billion addiction treatment industry. Forbes. Retrieved from https://www.forbes.com/sites/danmunro/2015/04/27/inside-the-35-billion-addiction-treatment-industry/#591d313117dc
Sforza, T. (2017). Addiction treatment: The new gold rush. ‘It’s almost chic.’ The Orange County Register. Retrieved from http://www.ocregister.com/2017/06/16/addiction-treatment-the-new-gold-rush-its-almost-chic/