July 2007 |
A Boom Unabated About a year ago, Robb and Debb Holub watched as their son emerged from a medically induced coma, mouthing the words to the favorite song his worried parents had played over and over again in the hospital room at Palomar Medical Center north of San Diego. As Joey Holub was on his way toward a miraculous recovery – he had sustained serious head wounds after being hit by a car, and was weeks away from walking out of the hospital on a path to making a full recovery – his parents began thinking about how they could give something back. The answer came when a friend of Joey’s, Jason Moscartolo, showed up to wish his friend well. “We had sent Joey to a wilderness program and then on to a therapeutic school in an effort to help him with his addiction to opiates,” says Debb Holub. “But Joey had trouble staying clean, and we were not happy with the therapeutic school we chose.” As the Holubs got to know Jason, who had experience on the counseling side in the therapeutic schools industry, they began to formulate plans to open a therapeutic academy together. Robb, a highly successful entrepreneur from the securities and information technology arenas, was at the time looking to diversify his real estate holdings out of the slowing California market. “We came across a property just outside of Taos, NM, that was perfect. With 37 acres and a 25 bed capacity, the place came fully furnished right down to the high thread count sheets.” Missions Over Profits “There is no question that the growth of this industry can be attributed to the efforts of small entrepreneurs, who have built the business one program at a time,” says Lon Woodbury, who, as publisher of industry newsletter Woodbury Reports, has observed the emergence of therapeutic schooling for almost two decades. “And the growth has gotten so fast that, frankly, I can’t keep up anymore with the number of new programs that are opening.” Data out of Woodbury Reports indicate that expansion of the therapeutic schools industry does continue unabated, and, indeed, is reaching an almost frenzied pace. Lon Woodbury estimates that there are now perhaps as many as 300 therapeutic schools and wilderness programs in the U.S. And the number of programs has exploded exponentially over the last two years.”There will likely be about 200 programs on our preferred list by the end of this year,” says Woodbury. “In 2005, there were only 110 programs on that list.”If sales have managed to keep pace with the growth in the number of programs, annual therapeutic schools and wilderness program revenues could very well have substantially surpassed the $2 billion mark. And while missions may be more important than profits to many industry entrepreneurs, the profits have nevertheless also flowed, which has attracted plenty of interest from the private equity crowd. Late last year, private equity powerhouse Bain Capital, through its CRC Health Corp, paid $290M for industry leader Aspen Education Group, which itself for years has acted as an aggregator of industry assets, backed in that effort as it was previously by private equity houses Sprout, Warburg Pincus and Frazier Healthcare Ventures. And many other houses have in recent years been trolling the market looking for a way in, with school and program owners reporting frequent approaches from a range of different private equity players. Other players, in addition to financial ones like private equity, have also been scooping up programs. Seeing Opportunity And Johnson, like many industry executives, has noticed a substantial uptick in competition for clients along with the rash of new school and program offerings. “The competition is more intense these days, there’s no question,” he says, adding that most players have responded to this increased competition by attempting to specialize, and thereby differentiate their therapeutic offerings. “Back in the early days, like with CEDU’s Rocky Mountain Academy and the like, schools were more generalist in nature,” says Johnson. “Now, in order to differentiate themselves to educational consultants and the parents, schools have taken to specializing in certain types of disorders or problems.” According to Johnson, there are now schools and programs for every possible need. “It has been amazing to watch the growth,” says Johnson, a 13-yr veteran of the industry. At UHS”s Northwest Academy and its sister wilderness program, Ascent, both in Idaho, UHS has sought to create a specialty serving troubled youths with addictive disorders. “Virtually all of the young people in these two programs, the school and the wilderness track, consulhave substance abuse as a major issue, and these programs have been retooled from a clinical and staff perspective to meet the specialized needs of these kids,” Johnson says. But Lon Woodbury points out that there is some concern among educational consultants about the increasing corporatization of the therapeutic schools industry, with worries about companies like Aspen Education, which is now under the corporate control of CRC. “There’s concern that profi ts may be put ahead of the interests of the young people we serve,” he says. |