In Historic Shift, Caron Displaces Hazelden as Biggest Non-Profit

Addiction Treatment Industry Newswire
02//18/2013 -ATIN- In a historic development, one that shows how critical it is for addictions non-profits to build deep and talented management teams that are skilled at stoking strong working alliances with mission focused boards, it now appears that Caron Treatment Programs management teams has solidly emerged as the largest private non-profit drug rehab alcohol rehab addiction treatment services provider in the nation. With expectations that client service revenue at Caron, according to CFO Drew Rothermel, will reach $125M in the fiscal reporting year ending mid-2013, Caron has displaced world famous Hazelden from what has been for many decades the AA-based treatment pioneer’s seeming permanent perch atop the private non-profits.

Change at Top

That Hazelden is no longer the treatment services revenue leader for non-profits – which together account for 60 percent of the industry – is a turn of events certainly with big significance for the addiction treatment industry. But Caron’s rocket-like emergence as the one to beat is more symbolic, rather than emblematic, of major changes post managed care in the specialty stand-alone sector of the addiction treatment market, which attracts approximately 45 percent, or about $19B, of the $35B or so spent annually treating addictions nationwide. With the famous “chit chat” moniker defining Dick Caron’s key role in pioneering spiritual, 12-Step care models after his return from WWII- just as he began to build out Caron’s main campus in south eastern Pennsylvania into the now famous Wernersville main campus – Hazelden was also, perhaps a little more famously, pursuing the same spiritual-driven treatment agenda based on the principals of Alcoholics Anonymous. In fact the two institutions together, Caron and Hazelden, more than any others it is likely safe to say, are responsible for shaping the overwhelmingly spiritual-based AA modality driven addictions care system that currently exists in our country.

Management Differentiator

Key founding management at the two centers began to move aside and make way for a new generation of managers just as managed care was savaging its way through the addictions market in the early 1990s. The bottom line is that management at Caron adapted brilliantly to this new environment, executing with minimal failure and exceptional continuity, with CEO Doug Tieman and right hand CFO Drew Rothermel working a team that pulled a struggling but venerable name from the brink, then put-the-pedal-to-the-metal and began growing client revenues from a mere $20M about a decade ago. Caron is now the largest residential player in the key East Coast “destination” South Florida market, with aggressive expansion that offers comprehensive care at every single price point – the new Ocean Drive at the high end down to the more affordable Gate Lodge, formerly a Hanley asset. With success in most ventures, from Bermuda to 

New York, Caron has won itself some wiggle room in places like Dallas.

Again, Management …

While Caron achieved all this with remarkable management continuity, Hazelden has gone through a few CEOs, culminating in the disastrous tenure of Ellen Breyer, under whom Hazelden lost virtually every single major senior manager. With a literal revolving door at the very top in the enormously difficult post-managed care years, it’s no wonder execution failed at most organic expansion efforts in places like Chicago and New York, not to mention the breakup of the long relationship with Hanley Center in Florida. During this period, publishing was the stellar performer at Hazelden, which struggled with enormous new high-end for-profit competition coming from Arizona and Southern California that had strong expertise in attracting cash-out-pocket private pay clientele. While Hazelden sat on the fence in the face of ever more intrusive commercial payor utilization review, ultimately making a decision to leverage very generous Minnesota attitudes toward treatment to make a big lucrative in-network play, Caron’s dynamic duo of management and board of directors made a gutsy decision early on to sever all insurance relationships… and once again executed brilliantly in the tough private pay environment.

A Radical Hazelden Initiative?

 So while client services revenues have rebounded in recent years, Hazelden CEO Mark Mishek says annual revenues ran at $105M to year-end 2012, well shy of the $125M expected at Caron year-end mid-2013. With assurances he plans to be around for a while, Mishek has managed to coax the return of key personnel like Medical Director Marv Seppala, who may be spearheading a quite radical expansion right at spiritual awakenings ground zero. In January, Hazelden acquired HealthWorks NW, which is essentially a group addiction medicine practice on steroids. It’s the kind of clinic, with Suboxone therapy a main component, which has been growing by leaps and bounds in the last couple of years and attracting plenty of private equity investment nationwide. Despite Hazelden’s assurances in the press release that HealthWorks and Hazelden are in similar treatment lines, the fact is the two couldn’t be more different and HealthWorks represents a radical departure into a highly medical model, one that Mishek told Treatment Magazine he’s not averse to building on in coming years.

 

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