Dual Diagnosis Addiction Care

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 ProblemEstimates 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 InvestorsInvestors, 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