It’s no secret that America has a drug problem. According to the latest reports from the Center for Disease Control, well over 71,000 individuals lost their lives to overdose in 2017. The situation we face today is dire, and expectations for the future are hardly any better.


The opioid crisis is a problem that demands a solution. The toll the drug crisis has taken on the country is at an untenable high, and everyone — from healthcare leaders to politicians to ordinary community members — are in frantic search of a solution. As of now, most are coming up short: private rehabilitation programs are expensive and often inconsistent regarding care quality, while waitlists for state-run facilities can drag on for months at a time.  


With all this in mind, I firmly believe that investors in the private healthcare sector can create opportunities for lasting recovery if they take a strategic approach. The rehabilitation market is a fragmented one, fraught with complications; investors’ work will not be a simple matter of opening a few rehabilitation centers and offering the bare minimum for care. Despite the complicated circumstances, however, investors who provide their backing wisely will have an opportunity to both change lives for the better and make a positive investment.


Let’s take a closer look at the factors complicating the market.


The Issue of Fragmentation

The substance abuse recovery industry isn’t known for its cohesion. Decades ago, the vast majority of recovery service providers were independent operators who provided safe houses and communities where addicts could find support during their recovery.  However, these homes were not — and continue not to be — guided by a set standard for care or regulatory oversight.


According to one study conducted by CASAColumbia, the vast majority of addiction treatment providers were not medical professionals and lacked even the basic credentials patients might expect the person guiding them to recovery to have. Evidence-based services such as medication and psychosocial therapy were in shockingly short supply; researchers noted that “Only a small fraction of individuals receive interventions or treatment consistent with scientific knowledge about what works.” Today, states such as Florida and California are oversaturated with organizations that purport to provide recovery services and yet deliver few services that align with current medical recommendations for care.


Now, this isn’t to say that some recovery centers aren’t capable, or that evidence-based care is absent entirely. Effective facilities exist, and they do save lives; however, without an industry standard for care, many patients in lower-quality centers inevitably cycle back into abusive habits and land back in recovery care. This cycle, in turn, leads us to the next problem: payment.


The Issue of (Non)Payment


Today, legislation such as the Mental Health Parity Act and the Affordable Care Act has ensured that the vast majority of drug addicts have some form of insurance coverage for rehabilitative services. Payers often contribute tens of thousands of dollars towards in- and outpatient programs for individual enrollees. However, the help insurers can give often falls short of the need; some industry analysts have found that out-of-pocket spending for substance-abuse programs skyrocketed a full 80% from 2012 to 2016. If the patient needs to return for multiple courses of rehabilitation treatment, insurer-provided financial resources can quickly run dry and leave the addict in a pit of debt.


To put this in perspective: according to research provided by the Wall Street Journal, approximately 41% of surveyed rehab patients had undergone two or more rounds of treatment previously. If even a small portion of an organization’s patient base has run out of insurer-provided aid and can’t afford to pay the bills they’ve accrued out of pocket, they may not pay at all. As a result, the organization is forced into the unenviable position of writing off those fees as a loss — and if nonpayment becomes a common occurrence, they may find themselves facing bankruptcy.


The Solution: Strategic Investment


Despite all of this, I still see rehabilitation as a worthy investment; the trick lies in getting it right. Investors need to establish quality care centers that focus on aiding underserved markets — i.e., those outside of high-turnover regions. They should also make helping addicts break the mutually costly recover-and-relapse cycle a priority by setting a high standard for evidence-based care and steering clear of scientifically unsupported, if inexpensive, treatment models.