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It was many years ago
that Dr. Morteza Khaleghi had his epiphany about addiction,
related as it was to problems his wife’s side of the family
had with the disease. “Yes, I saw the problems,” said Dr.
Khaleghi, whose psychiatric education is rooted in
the intensive self-analysis required for training in the
psychoanalytic modalities. “But I also saw that recovery
was possible, and that had a very profound effect on me.”
In 1989, Dr. Khaleghi started a psychiatric facility in
Northridge, CA, that opened his eyes to the extent that
psychiatric ills were accompanied by addiction.
By 1998, he
had bought a house in Malibu with the intention of treating
dually diagnosed patients there. His center, Creative Care,
has since emerged as one of the most respected, and fastest
growing, for-profit dual diagnosis facilities in the nation.
Keeping in mind California’s famous 6-bed zoning loophole,
Khaleghi’s first property had exactly that many beds, which
were filled almost immediately. “We started looking around
for another house right away,” Dr. Khaleghi said. “We got
lucky and found one right next door.” After that, for a time,
Creative Care added a new house every six to nine months,
growing to a total of 30 beds and annual revenues that are
likely in excess of $5 million.
Creative Care was among the early addiction facilities in the
Malibu area, where there are now over 20 treatment centers.
Many other addiction facilities in Malibu, including first
mover Promises and places like The Canyon, are also heavily
oriented toward dual diagnosis care. This is partly because
the high prices charged in Malibu require - and also make
possible - the offering of a greater range of treatment
modalities. But the area’s increasing focus on dual diagnosis
stems mostly from the fact that there has been a huge surge in
demand nationwide for services that can adequately address
the needs of the enormous portion of the addicted population
who also have co-occurring psychiatric problems.
A Big Problem
Estimates are that at least 10 million Americans suffer from
co-occurring addiction and psychiatric disorders, which is
about 40 percent of the 25 million or so individuals thought
by SAMHSA to be chemically dependent nationwide.
The problem is even greater with certain types of very
serious psychiatric afflictions such as schizophrenia, where
comorbidity rates are as high as 50 percent. A recent study
also found that about 50 percent of people who suffer from
eating disorders, afflictions such as anorexia and bulimia, are
also serious substance abusers. And comorbidity skyrockets
among those who are reported to have “lifetime” substance
abuse problems, with 53 percent of alcoholics in this category
having one or more mental disorders compared to 59 percent
for “lifetime” drug abusers.
It has only been in the last 15 years or so that the recognition
of the need to address co-occurring disorders has begun to
get more widespread, with most of that progress coming in
the last five years. During that time, SAMHSA undertook a
major report to Congress on the prevention and treatment of
co-occurring substance abuse and mental health disorders.
And dual diagnosis has also moved to the very top of the
agency’s policy agenda. “Promoting understanding and best
practices treatment in the area of co-occurring disorders is
now among SAMHSA’s top 4 policy objectives,” said
Kathyrn Power, director of the Center for Mental Health
Services at SAMHSA.
And while practitioners like Dr. Khaleghi generally agree
that there has been substantial progress in spreading
awareness of dual diagnosis and co-occurring disorders,
they often point out that the progress seems to be far more
widespread on the substance abuse side than on the
psychiatric side. “I am amazed at the lack of awareness
among psychiatrists of the issues involved,” said Dr.
Khaleghi. “With the prevalence of substance abuse problems
being so pervasive among those with mental disorders, this
issue should be in the forefront of every doctor’s mind whenever
a new client walks into their office, but sadly most of
the time it still is not.”
Plugged In Investors
Investors, on the other hand, seem to be very well
versed on the issues, with many deciding that services which
cater to needs of the dually diagnosed are likely to be
among the top growth areas in the treatment business. “We
see dual diagnosis as one of the best growth opportunities in
the addiction treatment arena,” said Bowen Diehl, who,
in his capacity as a principal at the Dallas office of
American Capital, recently put his firm’s money where its
mouth is. In early March, American Capital announced it had
paid a whopping $90 million for The Meadows, a venerable
and very early mover in the delivery of dual diagnosis care.
“There is, sadly, a growing need for addiction services,”
said Diehl. “The demand is tremendous, especially for those
services offered by centers focused on dual diagnosis.”
There are many investors who would agree.
In fact, the vast
majority of deal making within the addiction treatment space
over the past year has been focused on the nexus where
addictive and psychiatric disorders meet. CRC Health
Group’s crown jewel acquisition last year of Sierra Tucson,
an equally pioneer dual diagnosis player as The Meadows,
was followed shortly after by its purchase of one of the
nation’s premier dual diagnosis boutiques, South Florida’s
Wellness Resource Center. CRC’s latest acquisition,
completed early this year, was of Montecatini, a San Diego
eating disorder center that is among the oldest and most
respected facilities of its type in the nation. CRC CEO Barry
Karlin is no doubt aware of the high correlation between substance
abuse and eating disorders, with the correspondingly
strong cross-referral possibilities between CRC’s chemical
dependency treatment operations and Montecatini.
And it isn’t just the big moneyed players like CRC and
American Capital, as well as other private equity players
lurking on the sidelines, that are interested in dual diagnosis.
Late last year, Chaz Cabela, a scion of the outdoor catalogue
and retailing family, acquired Advanced Recovery Center,
ARC, another well-known South Florida dual diagnosis
boutique. And while Cabela was initially motivated by his
desire to help others achieve the same recovery that he has
as a graduate of ARC, he has since become smitten with the
strong business growth opportunities he sees in the
treatment business, especially in the dual diagnosis arena.
He is now considering an expansion of the ARC brand to the
Western United States.
“We are always so busy that we cannot take all the clients
that come our way,” says Richard Rogg, founder of Promises,
a Malibu-based facility that offers dual diagnosis treatment.
“And there just aren’t that many treatment centers for us to
refer out to that meet our quality standards.”
In the process of opening a new dual diagnosis program for
patients that have more serious psychiatric symptomology,
Rogg sees blue skies ahead for those contemplating opening
high-quality treatment facilities targeted at the dual diagnosis
market. “There is no question that this is probably going to be
the fastest growing segment of the treatment market for the
foreseeable future.”
And it is not just at high-end private treatment facilities that
the growth is occurring, but also in the publicly funded arena.
Among that nation’s top treatment entrepreneurs, Michael
Cartwright has built thriving businesses, both for-profit and
non-profit, around dual diagnosis. His biggest venture by far
is the non-profit Foundation Associates, founded in 1995 as a
halfway house. “When I went to AA at the start of my
recovery, I got a lot of misinformation about mental health
issues,” said Cartwright, who was a real estate developer
before entering the treatment business. “When I started
talking about the meds I was taking, everyone jumped on me,
saying that my meds were a relapse.” The experience helped
inspire Cartwright, who is among the founders of the
12-Step program Dual Recovery Anonymous.
Cartwright then went to work at a local mental health
operation, where his experience was that almost all the clients
at the center had a serious mental health issue combined with
a substance abuse problem. “A lot of my clients had thought
disorders like schizophrenia, as well as chemical dependency
problems,” says Cartwright. “I could not find a substance
abuse program that would take a single one of these
individuals, while the mental health programs left the
substance abuse side virtually untreated.”
Fast forward more than ten years, and Cartwright has built
Foundation Associates into what is among the largest
specialty dual diagnosis operations in the country. Since
opening up as a halfway house, Foundation Associates
has grown into a $10
million a year operation.
With two locations in
Tennessee, one in
Nashville and the other
in Memphis, Foundation
Associates services about
3,500 clients a year. The
Nashville operation is
funded entirely from
public sources, while the
Memphis location depends
on commercial insurance
for about half its revenues.
Clients are treated in a
variety of settings, with 88
residential beds between
the two facilities,
outpatient services, as well as halfway house beds.
Cartwright is expecting very rapid growth for
Foundation Associates, with revenues for 2006 forecast
to surge by 50 percent to $15 million.
“The potential for growth in dual diagnosis treatment
is enormous,” says Cartwright. “There are still relatively
few organizations that offer truly integrated levels of
care beyond just the
doling out of meds.”
Dr Khaleghi agrees:
“Facilities have gotten
sophisticated with their
marketing,” he said.
“There are now quite a
lot of treatment centers
who lay claim to offering
dual diagnosis treatment,
but there are really still
not that many that are
capable of making
accurate diagnoses, as
well as managing and
treating these cases
properly.”
Awareness is, however,
much better than in the past, with all 59 states and
territories having initiated programs aimed at helping
the dually diagnosed. But among the 50 states, there are
still only about 10 to 15 that are highly advanced in
addressing the dual diagnosis problem. JW
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