|Addiction Treatment Industry Newswire|
|12/28/2014 -ATIN – Just like anything in economics, events have both winners and losers. Like throwing a stone in a pond the ripples go out, with some ripples beneficial to those who have positioned themselves right and some ripples perhaps not so beneficial to others who have not been positioned right to react to unfolding events. In terms of economic events in recent weeks, by far the most important is the steep fall in oil prices. West Texas Intermediate crude for delivery to storage in Oklahoma – important because it is the basis of the most actively traded New York oil futures contract used by Wall Street money to speculate in the price of oil as well as well as by true economic players like producers and refiners who use the contract for price hedging purposes – West Texas Intermediate crude has fallen by 50 percent! in the final quarter of 2014 to approximately $50 a barrel. It’s given consumers more money and made, it’s been estimated, for the best holiday retail season in years. But for those who were making like out bandits when oil was over $100 a barrel, big oil producing states like Texas, North Dakota, Louisiana and Alaska stand out, layoffs are coming fast and furious and analysts like the Chicago-based ratings agency Fitch have written reports warning of vulnerability to the residential real estate market in Texas. From the standpoint of the addiction treatment industry, one thinks of the sober living part of the industry – the most important part we believe in terms of bang-for-back and contribution to more lengthy sobriety periods – and the growing addictions “hub” in Austin, TX also comes to mind in terms of possible real estate vulnerability.
Austin Has Highly Diversified Economic Base
In the American lexicon Texas and oil go together like Florida goes with beaches and sunshine, but the fact is that since the last huge fall in oil prices, during the mid-1980s when it fell to under $12 a barrel (about $26.50 a barrel in 2014 dollars) Texas has learned its lesson and has a highly diversified economic base with only 3 percent of its jobs linked to oil and gas. Austin addictions market observers dismiss the oil price fall as a serious threat to the real estate part of the sober living equation in that hub – the private sober living business all over the country in places like South Florida, Southern California and Arizona, for example, is dominated by small entrepreneurs and is based economically typically on a real estate play which is subsidized by the sober living operation, which is why so many who arrived late to the game were left with their heads in the their hands when the real estate crash hit in earnest post-Lehman. Says Jacob Levenson, CEO of MAP, an Austin based firm that provides outcomes measurement and post treatment observation and tracking services for treatment centers, as well as billing and other services: “The western part of the state along, along with Houston and less so, Dallas, are impacted and will continue to be [by the oil price fall]. However, as you [Treatment Magazine] stated, Austin’s economy is diversified across tech, academia, politics, health care, etc. and enjoys a degree of protection from the volatility of energy prices. The oil industry has never really been a part of the economy here outside of the legal and political components. [Treatment Magazine would like to point out that these components are quite large] The housing market in Austin is driven by the demand created by a mass influx of people moving to the city (they’re moving for many reason but working in the oil industry is not one of them). A significant number of Californians and other out-of-staters are finding their way to Austin – especially since 2008. Austin has the 4th worse traffic in the nation and our infrastructure is being strained across the board along with a loss of the ‘keep Austin weird’ culture as people attempt to bring a piece of ‘home’ with them as they migrate here. In fact, a popular bumper sticker in Austin states, “We don’t give a shit how you did it in California.”
Sober Living Much More Threatened by Aggressive Insurance UA Stance
In other words, Levenson does not see a significant oil driven downward risk for real estate values in the Austin “hub,” pointing out that a much more serious risk to the sober living industry, not just in Austin but all over the country, is coming from an “an aggressive payer stance on UA reimbursement.” Readers of Treatment Magazine will remember our stories a couple years back warning of abuses by some unscrupulous sober living operators billing health insurers $1,500 per U/A test every chance they got, sure enough followed up by blockbuster lawsuits by insurers followed up recently by a couple of high profile raids of South Florida sober living operators in recent weeks. Levenson continues: “As you know, this [insurance U/A payments] is the primary revenue source for a great many of them [sober living operators.] The sun is setting rapidly on this reimbursement construct.”
Sun Setting in Sunny Florida?
According to major sober living players in South Florida, such as Richard Dallas who controls some dozen or so sober living homes mostly in South Palm Beach County, the business environment for sober living in South Florida – where there is relatively little high -end sober living where rent covers costs, with $150 week payment models dominating – is not as good as it used to be. “The insurers want to limit you to perhaps one U/A a month now, “says Dallas, who previously checked his clients religiously once a week whether they were insured or not. And Dallas does not want to raise his prices. Dallas is legendary in South Florida for taking calls in the middle of the night from people who have relapsed, have one night left in some motel and nowhere to go without help. “I help the down and out,” he said.
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