The Business of Addiction Treatment

In the coming months, I’ll be exploring important issues on my CEO Blog, that can and will affect addiction treatment. I hope you find this to be informative, thought-provoking, and enjoyable reading. Please feel free to provide your feedback below.   -Jeffrey Fiorentino, CEO Kipu Systems, LLC.

Addiction is as old as mankind itself.

Yet, it wasn’t until the 20th century that we began to discover tools to treat its symptoms – and not until the 21st century did we begin to universally classify it as a disease.

As we’ve grown to better understand addiction for what it is, it has also expanded beyond localized fellowship counseling and support treatment into a big business, subsidized by insurance plans and encumbered by a growing maze of red tape. In his time as US Surgeon General, Dr. Vivek Murthy urgently remarked several times that our country is at a critical juncture of addiction crisis, in part, because of the paucity of accredited addiction treatment facilities.

For these and many other reasons, it’s vital to start considering your addiction treatment facility like the professional operation it truly is.

Modern-day treatment effectively began with Alcoholics Anonymous, and its offshoot Narcotics Anonymous, as non-profit organizations in which fellow addicts helped each other out in an informal environment designed to maintain their sobriety. Lots of good was achieved as these organizations spread out worldwide, and a few treatment centers even sprouted up, such as The Beachcomber in Florida (which has recently celebrated its 40th anniversary), but it wasn’t nearly enough to stem the tide of addiction.

A Brief History of the Business of Addiction Treatment

Full-scale treatment centers became more popular in the 1970s, as Betty Ford’s public battle with addiction took center stage. They expanded in local communities, and addicts stepped forward like never before, relieved of the some of the shame. For the most part, these treatment facilities were founded and operated by well-intentioned former addicts, seeking a career in helping people like themselves.

At that time, treatment took on all types of formats as operators experimented with different strategies (in a non-regulated environment), to see what worked best. Practices began to standardize in the late 1990s and into the 2000s though, with expansion and techniques ebbing and flowing along with the cycles of addiction and drugs of preference. As has been well documented, the most recent decade has seen a monumental increase in the number of struggling addicts and a coinciding expansion of the addiction treatment industry. This, in turn has led to additional government supervision and a greater reliance on insurance to cover the costs of critical treatment.

Most addiction treatment centers are still run as small businesses, merely wanting to help their patients. However, they have become overwhelmed by bureaucracy from both the government and insurance companies, implemented as a result of the growing epidemic of addiction. It is therefore more important than ever for addiction treatment centers to run themselves professionally on all levels, to maintain profitability and provide high quality of service.

7 Ways To Combine Business Sense With Addiction Treatment

The modern-day treatment center needs to account for numerous business concerns.

Complementary service providers are developing in other disciplines to fulfill these needs. For example, there are now accountants and lawyers who specialize in addiction treatment; tech companies have developed software with addiction industry-specific needs, and targeted billing and collection services have sprouted up to serve your particular requirements.

Here are seven specific things treatment center operators need to consider as business owners:

  1. Retain a competent and knowledgeable attorney now, in advance of any problems – particularly one with key experience in the addiction treatment area. This is important on many levels, since certain liabilities are specifically associated with running a treatment center. Moreover, the growing maze of regulations ensures there will be (avoidable) pitfalls and other industry-specific concerns that need to be monitored. You will also need your attorney to perform a yearly compliance audit. In a recent well-publicized case, the owner of a detox center was charged with manslaughter in California when a patient died while in the care of his facility. The charges were eventually dropped only because the center’s owners had the systems and procedures in place to minimize their risk. When it comes to your lawyer, an ounce of prevention is worth a pound of cure.
  2. Hire an accountant who understands your business. There are a host of deductions and expenses which can legitimately be written off, provided you plan correctly in advance. For example, Section 179 of the Tax Code may allow you to write off 100% of a van, or lab testing equipment you purchase for business use. There will also be other issues that arise on an ongoing basis, particularly if the newly elected US government starts tinkering with the tax laws, which they seem likely to do. A wise accountant can more than pay for himself with some insightful advice and counseling.
  3. Find and purchase or lease software that makes your life easier. The addiction treatment business is now burdened by mountains of paperwork and record-keeping, just like the rest of the health care industry. It’s unclear what might replace the Affordable Care Act and how that might impact your business. It has become impossible to effectively run your operations with mere Word, Excel and QuickBooks. You need to give serious priority to a quality EMR (Electronic Medical Records) system that can make your job easier and reduce staff time. It’s vital to work smarter in order to keep your costs down.
  4. Consider an outside billing company. What is the biggest hassle you face as a business? For most, the answer is billing and collections. There are several billing companies in our industry which specialize in this area, making your job easier and recording higher collection rates than you could on your own. In most instances, they not only eliminate a hassle but actually allow you to collect more revenue than the cost of the services.
  5. An experienced insurance expediter can make a big difference in your operations. There are some software and billing companies that wrap this function into their operations. Depending on your needs, you may decide to hire a particular dedicated professional for your operations. Either way, insurance companies are fighting and denying claims at a greater rate than ever before. This is a huge challenge. Insurance expediters and outside billing companies who deal with insurance companies in volume, on a regular basis, are better equipped to efficiently handle this aspect of the business for you.
  6. The right administrator is invaluable. There are so many moving parts in running your operation. You need to deal with patient needs, paperwork, ongoing staff rules and regulations, etc. Having proper staff must be a priority and that starts at the top. Since addiction treatment is such a fast-paced growth industry, it may not be as simple as advertising for someone with relevant experience. You may need to search for people with other types of management experience and skills that can translate into the field. Be open-minded and search the character of the individual to make the best choice.
  7. Take your marketing more seriously. Increased competition ensures that it’s no longer as simple as hanging up a shingle and waiting for patients to beat a path to your door. Whether it’s a full-time advertising professional or running ads in a targeted online campaign or addiction-specific publication like InRecovery Magazine, you need to consider advertising as an integral part of your business. Experiment with different methods, and develop a cost/benefit analysis that maximizes value based upon your particular needs.

How To Get Started

Given all the information above, I’m sure your final concern is “exactly how do I find the best service providers to suit my needs?”

Great question.


The best resource for everything is always friends and fellow business associates. Ask for referrals and recommendations, and follow up with interviews just as you would for any hire.

Second, look to trade shows. Frequent and sight-see at these events to stay on top of industry standards. It’s a great environment to find what you’re looking for.

Lastly, search professional advertisements offering services, or even run your own advertisement, depending on the need. It’s important to be proactive. This is your business. This is your life. You need to dedicate time to all aspects of running your successful business.

Finally, check out our own Kipu Marketplace – many amazing sources are listed there, and the list is growing – so check back often.

As I continue to attend conferences around the country, and follow the meteoric expansion of our industry, it becomes ever more apparent that we can only expect more growth and innovation. Addiction is exploding across the country, and the opportunity for us to help so many who are so sorely in need is obvious.

However, we can also expect continued push-back from insurance companies and encroachment by government. It’s an inevitable consequence of our advancement into the mainstream.

Fortunately, mainstreaming will also invite more competition, driving down prices and encouraging a greater number of available services. By getting ahead of the curve and turning our businesses into sustainable professional organizations, we will ensure that we are well prepared to share in the explosive growth still yet to come – all while serving our passion to fight against the scourge of the nation’s addiction epidemic.