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American Addiction Centers Looking to Buy Outpatient in NYC
Written by Ted Jackson   
November 2014

 Amongst all the state addictions agencies, there is none more powerful, and few as active, as the New York state agency that is known in the treatment world mostly by its acronym, OASAS. The Office of Alcoholism and Substance Abuse Services latest is financing a much needed center that is focused on providing care for veterans that are returning by the many thousands some of whom in an odd twist that only bureaucracy could produce cannot get services because their discharges are less than the "honorable" discharge required for full access to care in the veterans system. These clients are welcome at the new veterans center run by friars, located in the upstate Saranac Lake area of New York. OASAS operates a host of centers and had a budget that once exceeded that of California, Texas and Florida combined when it comes to fighting addiction. Much money though is spent in the state on short-term detox programs that have been heavily criticized as costing much but producing little.

Relatively Few For-Profits

Whether or not this criticism is accurate or even fair is hard to say, but in New York, one of the very largest addictions treatment marketplaces in the nation, for-profits do seem to be under-represented and the big for-profit players, like Elements Behavioral and CRC Health Corp. do not have centers there at all. And some executives, speaking on condition of anonymity, have complained about high barriers to entry due to complex bureaucratic approvals processes that are maintained by OASAS that have the effect of discouraging competition from new entrants into the New York state addiction treatment market, although some treatment entrepreneurs say they have had little problems and gained OASAS approvals in only a matter of a few months and opened their centers relatively quickly.

AAC's Manhattan Outpatient Acquisition

That deal was anticipated to be announced within a month around late last year, AAC CEO Michael Cartwright told us, and was linked to a deal in Ringwood, NJ about 50 miles from NYC. Out of a long string of facilities in federal filings Cartwright'American Addiction Centers, or AAC Holdings, Inc. as the company is now known officially, Ringwood is the last facility to be discussed. Perhaps due to complexity of certification, the Manhattan outpatient deal is not mentioned, but Cartwright if he is anything he is persistent.And it may have had nothing to do with OASAS that Cartwright did not close the deal for the NYC outpatient center located Cartwright said in Manhattan. For-profit wise, there's Liberty Management and Westhampton's Seafield Center that have long been operating in New York, as has Norm Sokolow's Cornerstone NY which has a 150-bed flagship facility in Queens that has been in New York for a very long time. And in Manhattan there are a number of outpatient clinics, one of which Cartwright wished to acquire but somehow still has no deal done. At the time Cartwright could not identify the clinic being, of course, under non-disclosure and now he is still in a "quiet period" where he must let the filings at the Securities and Exchange Commission do the talking for him.

Convent Conversion

And so what has occurred is very fast growth of a "hub" in Western Pennsylvania and Northern New Jersey, and with a conversion of an ex- convent in Ringwood, NJ as the route that AAC appears to be focus-ing on now. According to SEC documents AAC filed, the now well-on-its-way to being nationally branded treatment operation, with about $13M invested annually on ads/marketing, AAC  said it has entered into an agreement, which the company says is subject to a number of unidentified conditions being worked out and the arrangement of financing, to purchase the ex-convent property. The IPO might help with that having put just shy of $70M at AAC's disposal. What AAC says it would be getting is the former convent on 96 acres, which is slated to provide 150 beds which AAC says it anticipates will begin construction on early next year for possible opening in 2016, with services ranging from detox, residential treatment, partial hospitalization, or PHP, and the accompanying intensive outpatient treatment that requires. When AAC completes Ringwood, it will be a substantial addition indeed to the growing "hub" mentioned  above and linked to the marketing network, a formidable competitor. TJ

 

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