Malibu Addiction Center Growth Hurts Betty Ford

Written by Ted Jackson

May 2008

TAILOR MADE CARE THE RAGE… as consumers reject traditional addiction treatment models

Quite a few years ago, the CEO of Betty Ford Center, the notoriously ill-tempered John Schwarzlose, began a series of tirades against Malibu centers in the storied non-profit’s newsletter Findings. The attacks, which went on over several newsletter issues, were very strongly derisive of the fast growing Malibu market. Schwarzlose argued that the treatment facilities increasingly popping

up along Malibu’s magnificent canyons were little more than spas that overly pampered their clients, the assumption being that somehow toughness and deprivation were necessary and vital elements to the treatment process “He really was without mercy,” says a top Betty Ford insider, referring to the attacks against Malibu. “He was relentless.”

Relentless Growth

But so too have the Malibu centers been relentless in their own way, and not in a way that Schwarzlose – nor Betty Ford’s board for that matter – have foreseen nor likely welcomed.Malibu has been relentless in its growth and, also, in spreading across Southern California – by far the largest regional market for private addiction care in the nation – its highly consumer friendly and consumer driven model of care. Begun in the 1990s by pioneering treatment entrepreneur Richard Rogg – who just sold his famous Promises center to acquisition minded private equity interests – Treatment Magazine estimates that the Maibu market proper – within the city itself – has grown into a treatment micromarket of perhaps at most a couple dozen centers with well over 400 beds capacity and at most $150 million in annual revenues.But the expansion of the model that Rogg pioneered – highly popular, consumer friendly and very strongly tailor-made care designed to suit individual treatment needs – has spread rapidly up and down the California coast from Malibu, with growth also based partly on the now famous six-bed zoning loophole embedded in California behavioral health statutes.

Betty “Affordable”

There are now hundreds of centers in California offering this highly popular type

care and, even in the wake of the financial crisis and recession, dozens of new centers have opened amidst a dampening of private pay treatment demand. In this environment, old fashioned, “one-size-fits-all” treatment providers have emerged as highly vulnerable. And now Betty Ford – the first high-end “celebrity” center, that was once almost the sole subject of treatment tabloid attention and virtually the second home of celebrities like Elizabeth Taylor – has become a Betty “Affordable,” having to deeply discount its rates in a struggle to fill empty beds.In an email exchange with Treatment Magazine, Schwarzlose attempted to proudly cast the discounting as a clinically driven shift to long-term care, which has been proven beyond a doubt the primary driver of better outcomes, especially in the prevailing 12-Step, spiritual models of care that are so loudly espoused by Schwarzlose and Betty Ford.

Diving Census

While Schwarzlose refused to answer questions about rumors of a record low census at Betty Ford, he did say that fully 40 percent of the center’s clients were now enrolled in 90-day stays. And he revealed that Betty Ford was engaged in massive price discounting, getting just $42K for its 90-days, whereas previously the non-profit would run three clients through during a 90-day period, netting almost double the revenue, approximately $75K. Reliable sources tell Treatment Magazine that there has indeed been a huge drop off in census at Betty Ford, with current bed fills at about 115 out of a total bed count of in excess of 180, or a highly meagre capacity utilization rate of just 60 percent or so.

Go East Young Man

So far, highly individualized, consumer friendly, Malibu-style care is a rarity on the East Coast.It is hard to overemphasize the importance of the six-bed zoning loophole to the rapid spread of Malibu-style care throughout California. And in top East Coast private markets, Florida, for example, it is hard to underemphasize the importance of virulent NIMBYism as an impediment to center expansion, especially in the delivery of Malibu-style care in residential neighborhoods Nevertheless,West Coast treatment entrepreneurs are more and more eyeing the East Coast market as the West becomes increasingly saturated with high-end care. “One-size-fits-all” providers may go the way of Betty Ford if they ignore demands from consumers for a greater array of choice in treatment products and services, as well as more individualized care that is tailored to their unique needs and circumstances.