New High End Addiction Center Seeks to Fill Chicago Market Gap

NIMBY NONSENSE

Of course, the usual NIMBY nonsense has started in Campton Hills, an upper middle class community where the average home has sold for $425K this year, with packed community meetings and flyers posted. Evoking Nightmare on Elm Street type chaos, a local opponent has claimed that because Kiva will be a dual diagnosis facility that dangerously mentally ill people could escape the non-lockdown center. It is indeed true that some highly unscrupulous or just plain negligent centers have at times taken clients with both mental and physical health issues that make them inappropriate candidates for admission, but in the case of Kiva these type of shenanigans are highly unlikely given the high quality addictions management names in the startup’s consortium. On the Kiva clinical operations and management side will be Steve Greenberg and Jim Butler, both long time veterans of the Chicago treatment scene, which more than any other market seems to have gotten stuck in some kind of 1980s time warp where much of the treatment is still delivered by programs associated with med surg hospitals. (The trend of med surg facilities using excess bed capacity to start treatment programs was started by the legendary George Mann at St Mary’s in Minnesota but was pretty much brought to an abrupt halt when inpatient benefits were decimated post managed care as hospitals bailed out of addictions in droves.) Steve Greenberg is the founder of Recovering Communities of Step Ahead and has decades working in Chicago area outpatient and inpatient hospital-based care, while Jim Butler worked his way up the ladder at Lifeline, ultimately becoming CEO of what became one of the largest chains of insurance-based reimbursed addictions programs in the Midwest. On the business/finance/consulting side of Kiva is Phil Kosanovich, CEO of advisory and consultancy PK Associates.

LOST OPPORTUNITY

By far the largest treatment player in Illinois is the dynamic, super high quality Chicago-based non-profit Gateway Foundation, headed by the penny pinching Michael Darcy, who has emerged as a highly competent player in the sector of the treatment industry that could formerly be called the public non-profits but that are now, due to enormous state addictions funding cutbacks, being forced to switch to marketing from grant writing and compete in unfamiliar private – cash pay, insurance – addictions markets in order to survive. (Another savvy player in managing this enormously complex transition is CEO Nancy Hamilton of OPERATION PAR out of Tampa.) The Gateway board, seeing the writing on the wall, years ago ordered Darcy to start transitioning to more private insurance based care. Darcy assures Treatment Magazine that the crucial switch is on plan and on target, but admits that Gateway’s big $40M cash hoard has dwindled and has refused to provide Treatment Magazine with Gateway’s latest financial statements. (The leisurely pace at which addictions non-profits make their financial statements public is a downright scandal – not to mention filing shoddy hole-filled reports, though Gateway doesn’t fall into the later category by any means.) According to databases that track non-profits, in the fiscal year ending June 30, 2011 Gateway had revenues of $56.3M vs expenses of $58M. In the opinion of Treatment Magazine, Gateway has now let pass a golden opportunity to convert its magnificent Lake Villa property into a super high-end cash cow, using the proceeds to further its non-profit mission in a strategy that Caron is now pursuing with great success at its $120K-for-60-days South Florida Ocean Drive center. Gateway’s conservative board, perhaps fearing to tar its image and culture with the greed that infects Malibu, decided years ago against going ultra high-end at Lake Villa. With Kiva Recovery and the new aggressive owners at Timberline Knolls, the high-end Chicago gap that Gateway could once have had all to itself appears well on its way to being filled.

Editor’s Note:  By mentioning Hazelden’s past long time dominance of the Chicago high-end scene, we did not at mean to give a false impression of competence. Hazelden expanded into the Chicago market in the late 1990s, buying the former Russian consulate building in the swanky Near North of the city and hoping start a thriving local treatment operation. The initiative was thoroughly unsuccessful and distinguished itself principally only as a savvy real estate investment play. In an interesting aside, a Chicago judge refused to grant Hazelden its non-profit exemption from city property taxes, essentially ruling that Hazelden’s stated lack of focus on helping the financially disadvantaged and primary focus on treating the wealthy disqualified the legendary center, with its massive $250M endowment, from getting the tax exemption reserved for charities. Hazelden had the ruling overturned on appeal.

read our 2009 Special Report “THE MIDWEST GAP”

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