Chicago Addiction Giant Gateway Sees Cash Position Deteriorate PDF  | Print |  E-mail
Addiction Treatment Industry Newswire - Newswires


03/02/2012 -ATIN- Chicago's Gateway Foundation is in the midst of a wrenching transformation - as are other non-profits like Phoenix House and WestCare that formerly prospered pre-crisis when the states were dramatically ramping addictions funding - as it seeks to survive in a drastically new publicly funded addictions environment. 

If any public alcohol rehab and drug rehab has the ability the weather the state budget storms sweeping the nation it is Gateway, which is as well managed

and has as high a clinical standards - as well as top quality physical plants - as any of the top private players in the addiction treatment industry. In fact, Gateway very likely surpasses many of the private centers in this regard. And while Gateway CEO Michael Darcy says his board is pleased at the progress that has been made so far to refocus the Chicago alcohol rehab and drug rehab on becoming a major player in the market for serving well insured middle class consumers, he admits Gateway's financial strength is deteriorating.

"Our cash position is down," is all Darcy would say, refusing to reveal how far cash levels have fallen from a pre financial crisis peak of $40M.

The new consumer strategy clearly puts Gateway square in competition with the private side of the business. Several years ago, Gateway's board - seeing trouble looming in its Illinois home market, where the state government, along with New Jersey, in which Gateway also has a corrections presence, is among the most financially distressed in the nation - ordered Darcy to shift revenue efforts toward commercial insurers, mandating that he achieve one-third of revenues from paying customers within several years.

Sources inside Gateway, who asked not to be identified, said Gateway has not achieved that goal and that it has yet to fully replace revenue lost on the public side with private streams, both private pay and insurance.

One visit to Gateway's web site shows how drastically the company is attempting to change. The new site is as highly Internet engineered as any of the most sophisticated Southern California or South Florida private drug rehabs, showing how Gateway is trying to move to marketing and away from grant writing. But it remains to be seen whether the former public player can successfully manage such a transformation - a major and very difficult transition requiring cultural change, which is tough on any institution.

 Darcy blames the lower cash levels on slow payments from state payors, saying "we continue to carry a large receivable from government but payment is expected on 99.9 % of the receivable," adding that he expects Gateway will be paid in the long run.  However, Darcy might do well to remember what legendary economist John Maynard Keynes said about betting on the long term, which is that "in the long run we will all be dead."

Gateway's refusal to divulge its current cash position may signal a significant financial deterioration, and thus the question may become one of whether the former public player can become a success in the private markets quickly enough to ensure survival - a question that may loom for all big public players if states continue to cut back.

Gateway might do well to take a page out of the Caron Treatment Centers' playbook. Caron has recently opened a super high end, $120K for 60-days, center in Delray Beach, FL, a move designed to leverage the Caron brand in the ultra high end of the market, using the profits from the new venture to advance the non-profit charity care mission. In response to a question from ATIN a couple of years ago, Darcy admited that Gateway's board  had considered, and rejected,  converting its spectacular Lake Villa facility - located on a former estate north of Chicago in one of the wealthiest neighborhoods in America- into a high-end private pay facility.

And while wadding into the greed invested waters of the high end private pay business may give pause to a board as focused on its charity mission as Gateway's, Illinois' state budget woes appear to be getting worse, not better, as the economy has gathered recovery steam. Gateway's board may be forced to reconsider it's plans for Lake Villa and, if it does, it will have the high end private pay market pretty much all to itself in Chicago, which is singularly bereft of high end offerings.

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Developer of the New Concept Model in Science Based Addictions Treatment
written by Dan R. Gray, April 08, 2012
Having started the science based addictions movement in 1983, I have watched 76% of addictions treatment flounder in the public sector in a perpetual "Money-go-Round" of wasted tax dollars. Sticking with a "psychosocial form of AA" as a treatment model has yielded little better than AA itself in long-term outcomes. Most public funded programs do little or no MAT and virtually no long-term follow-up to justify their existance.
The courts have been their primary referral feed and the criminal justice system and the War on Drugs have become a dismal failure.
True addiction is a genetic/epigenetic disorder of neurobiological functions within the human brain. ASAM agrees, finally.
As founder of the Neuroscience and Addiction Research Foundation in 1986, the movement by NIDA and NIAAA toward a science based treatment model was initiated. Thus came SAMHSA, CSAT, CSAP,and NATTC. Unfortunately, this has taken far too long to mature. Mostly due to lack of funding.
The swing back to private pay is making a return and in most cases will have to ride on the back of current science and treatment technologies to survive and thrive. Failure to use a solid science and clinical evidence based program with extended care and relapse prevention followed by long-term follow-up studies will likely bring the demise of the program. Private payers want positive long-term outcomes and have every right to demand exactly that. Extensive re-runs and flawed care that ends up as front page news is usually the result of shoddy and very unscientific and unprofessional treatment. That hurts the treatment industry as a whole and jacks up the malpractice insurance rates. We do not need that.
What I am saying is that you must have top quality science in place and being used in a highly individualized manner. The IT functions must be established to provide for long-term follow-up. MAT and collaboration with other professionals must be established. The entire program must be as (w)holistic in total as it can be. The need is there and a new door is just opening. Don't try to get by in the private sector the same way that you did in the public sector. That will not fly.
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