A Brief History of Addiction Treatment Marketing - Circle Social Inc

A Brief History of Addiction Treatment Marketing

There are many new players coming into the field of addiction treatment, ones who aren’t necessarily aware of the history and trends that had very strong influences in the field today. This article is for those looking for some background on the space, especially private equity firms and investors, new owners, or even individuals looking for treatment that want to be more familiar with the history of addiction treatment marketing.

Before the Affordable Care Act (often referred to as ObamaCare), there were far fewer addiction treatment centers across the country. Those that existed were largely community-based with the rare exceptions of high-end or well-known centers such as Hazelden and Betty Ford.

Marketing during this time was almost exclusively driven by local efforts and boots-on-the-ground approaches. To succeed, centers needed to be part of their communities. While the same is essentially true for a healthy, sustainable program today, there did not exist the potential for high-cost, high-reward online marketing efforts.

In the pre-ObamaCare era, admissions were found through relationships with those related to the field – psychiatrists, counselors, therapists, churches, hospitals, jails and the court system. Note that other treatment centers were not as much a part of this mix as there weren’t enough other centers across the country with differentiated levels of care to make referral relationships an effective patient acquisition strategy. Additionally, connections across the field were quite loose and most admissions came from local radii, so it didn’t make sense to have far-ranging connections.

Post-ObamaCare Drives Crazy Profits & Creates Shady Operators

Following the implementation of the Mental Health Parity Act, suddenly insurance providers were forced to pay for addiction treatment. Previously, centers had been relying on cash pay or were usually non-profits that accepted Medicaid or minimal sliding scale fees.

But ObamaCare finally gave the law some teeth. This is where people suddenly found out that addiction treatment could be insanely profitable. Because insurance providers had not taken into account the potential for abuse from the addiction treatment sector, billing codes for addiction treatment didn’t exist.

This meant that you could charge whatever you liked as a day rate and continue offering higher levels of care for as long as 90 days. Payers were basically making a determination on a case-by-case basis, with some policies paying out as much as $60,000 a month. Since real operating costs were under $4,000 per patient, especially because many centers were only using certified substance abuse counselors and not masters licensed clinicians, profit margins were incredible.

This high margin of profit attracted a lot of unscrupulous operators, particularly in Southern Florida, Southern California, and Arizona. These hot spots of shady operators tended to center around the cities of Del Ray Beach, Florida, Prescott, Arizona, and Orange County, California.

None of this is surprising considering that some of these new operators were people just coming out of treatment themselves, sometimes sober, sometimes not. When in active addiction, there is often a certain me-first mentality. It’s not uncommon for people to have been living on the street, spent years in jail for drug-related crimes, or just generally been used to lying and stealing as a way of life.

While they might have found sobriety through treatment, changing that mentality of lying, cheating, stealing, and me-first can take much longer, sometimes as long as 10 years depending on how long a persona has struggled with addiction.

So you had some people that went from living on the street or getting out of jail to being able to open up a treatment center and make more than a million dollars a year. On top of this, admissions were easy to generate through patient-brokering and Adwords (I’ll talk more about Adwords’ role in a bit). When you’re getting reimbursed $60,000 a month per patient and with many patients coming back multiple times, you could pay $15,000 or more an admission and still be profitable.

Eventually, the payers saw the huge amounts of money going out the door for addiction treatment services. Once this happened, they started putting standardized billing codes into place, drastically reducing reimbursements by 25% to 50% or more. As the payers became more and more aware of the money being used to finance things like swimming pools and exorbitant marketing spends rather than high quality clinical care, they further continued to reduce reimbursements and made it much harder to get reimbursements approved in a timely manner.

Addiction Treatment Becomes a Hospitality Industry

As mentioned, a primary way of driving admissions in these hot spots became patient-brokering. This was a win-win for unscrupulous players in the industry. For those who don’t know, patient-brokering, sometimes called body brokering, is the act of paying a 3rd party, or even internal staff, for an admission. It’s like 100% commission for a car salesman.

This is now illegal under federal law since the Trump Administration passed the SUPPORT for Patients and Communities Act. However unethical, it was technically legal in every state prior to July 2017, when the State of Florida passed the first laws making it a crime.

Treatment centers loved this model because they only had to pay for admissions. There was no upfront or on-going marketing costs, just bottom-line results, a situation other fields can only dream of. As we’ll discuss later on, this pay-per-admission era had a radical effect on how treatment center operators approached profit, loss, marketing, and admissions.

In this model, centers would pay a patient-broker anywhere from $500 to $5,000 per admission, this payment climbed as competition increased (At the field’s peak in South Florida in 2016 and early 2017, there were over 1,300 treatment centers in Palm Beach County alone!) Patient brokers even started to get the “patients” in on the action. They’d provide a “break off” or payment to go into treatment. If the broker got $5,000 for an admission, they might give $1,000 of that to the person they were admitting.

The worst part of all of this was not that centers were paying for heads-in-beds, as this mentality is referred to in the field, but what it did to those struggling with addiction and how it turned the field from addiction treatment into one defined by hospitality and insurance fraud (note again that most of the country was unaware of all of this. The bad operators were largely concentrated in the FL, CA, and AZ areas previously mentioned).

At first, patient brokers may actually have been looking for people to help. They’d go into AA meetings where people were already looking to get sober, make friends with members of the group, and then encourage them to join a treatment program they were working with (assuming they had good insurance of course).

But this devolved quickly. Many of the patient brokers were again people who rarely had the best of intentions. Brokers could easily make $150,000 or more a year, which attracted those looking to make a quick buck rather than being concerned with helping people.

I should note here that some patient brokers did have good intentions. Shady operators and marketing agencies would take advantage of someone who was newly sober, telling them they were helping people find treatment and making a good living at the same time. For someone newly sober and quite vulnerable to outside suggestion, this seemed like a dream come true.

Things Get Worse: The Rise of Flop Houses in Addiction Treatment

The situation continued to steadily spiral downward. Shady operators quickly realized that they didn’t even need to help people to bill insurance. All they needed was someone to give a dirty urine screen or say they needed help to get admitted into a program.

No longer did patient brokers even bother trying to find those looking for help. They simply cruised the strips and the beaches where many drug users were to be found. Their main targets were other Millennials because, under ObamaCare legislation, dependents could stay under their parents insurance until the age of 26.

While heavy drug users may not have stable employment, and therefore didn’t have insurances that could be billed for tens of thousands of dollars a month, Millennials did. You could admit a drug user into your program, bill their insurance, and even let them continue using drugs knowing that you could simply re-admit them 2 months later and bill the insurance again.

At the worst of it, patient brokers would check themselves into a treatment center, then mingle with the patients there and offer them cash incentives to leave with him/her and go to another center where they got kickbacks.

Word quickly got around in the drug community that you could go to these flop houses, as they were called, and stay for free. Suddenly, shady operators were competing with each other for admissions. The drug users understood this and began to make demands. They began to use their insurance card like a credit card.

They no longer just wanted a place to stay, they wanted Xboxes, free cigarettes, a center with a pool, a room with a view of the sea, and as things got really ridiculous, marble floors in the lobby.

Because these centers were making so much money off of insurance, they had tons left over to add all these amenities and provide things like free cigarettes (Note that all of this is basically insurance fraud as the money is supposed to go towards better treatment, not cigarettes or video games).

It started being common for drug users to go to 10 or more rehabs, never interested in getting sober, but just interested in a free place to stay with whatever amenities they could get. Regular users even got to know their insurance policies and would demand more if they knew they had a good policy that paid out well.

Some of the worst operators would even pay for the insurance. They’d find a way to get them a policy on the Healthcare Marketplace. Paying $400 a month for a policy only to turn around and charge that policy tens of thousands of dollars was a no-brainer.

This is the reason so many treatment centers, even today, focus on amenities in their advertising and on their websites rather than good clinical care. A certain percentage of people going to treatment in these hotbeds of patient-brokering in Florida, Arizona, and California had no intention of getting into recovery, they just wanted to milk a broken system for all it was worth. This created a warped perception in marketing that it was about amenities rather than good treatment.

The Spill Over into Shady Online Addiction Treatment Marketing

While the treatment centers were making money hand over fist, marketers also saw huge opportunities to get in on the action. When there is intense competition, you need marketing to find customers and beat out your competitors.

Some “agencies” were nothing more than groups of patient brokers. However, there was a fundamental shift in the industry once centers started to realize you didn’t just have to focus on your local community. People across the country wanted addiction treatment, most of them were loved ones of the addicted. At any given time 70% or more of a center’s admissions will come from referrals of loved ones rather than potential patient themselves. Most users have no interest in stopping their use and, if they have reached that point, many of them have lost their jobs and the insurance that goes with it by that time, so are not eligible for programs charging $20,000 or more a month.

Centers and marketing agencies together realized there was a ton of money to be made in this national market. Parents and other loved ones had no idea where to turn. They were afraid to reach out in their local communities due to the stigma around addiction. So many turned to the Internet. And, by the time they were willing to turn to the Internet for help, they were in a state of crisis.

This is also where the illegal practices of offering free flights or waiving deductibles became prominent. Even well-regarded programs were offering free flights to come into treatment. One even called it their Thanksgiving and Christmas special.

Whereas in most health care settings people evaluate multiple providers and do a lot of research, or go off of the referral of a professional, people were searching the Internet and making decisions based on a single phone call. They were desperate and latched on to the first person they talked to, never suspecting that the program may not actually be offering a high standard of care. This was a gold mine for lead and admissions generation.

All you had to do was start running Adwords or be really good at SEO and you were suddenly ranking across the country. Until Google completely revamped its algorithm regarding localization and some elements specifically around addiction treatment (which I’ll talk about more in a bit), you could be a center in Florida and ranking in position 1 for addiction treatment in Pittsburgh.

Because there was so much money to be made, marketing agencies were often as unscrupulous as some of the treatment providers. They even started running their own call centers. So they might run their own Adwords campaigns for a generic looking website about seeking help for addiction treatment. This site would have a 1-800 number on it that you could call “to get help now.”

A marketer, someone who has no experience with addiction or counseling, would answer the phone and get your insurance information. They would then sell that information to the highest bidding center, regardless of whether or not that center was a quality program.

As late as early 2017, when you searched for addiction treatment online, almost all of the top ranking positions were these lead aggregator sites run by for-profit marketing companies or even owned by an addiction treatment center. Rather than sending people to their own website, they would try to get people to go to a more generic site that resembled an informational help site or a non-profit. This is ironic considering the fact that people are 4 times as likely to call a branded website rather than a generic looking one.

Eventually, this spilled over into Facebook as well. It’s not uncommon to find a Facebook page like The Addict’s Diary or Fight Addiction Now to be run by treatment centers. The centers generally fail to disclose that their pages or groups are being run as for-profit entities with the purpose of generating admissions for their program. They look like non-profits or as if individuals who want to help have created personal pages and groups.

As of this writing in December of 2018, you can still find review sites like rehabs.com (owned by American Addiction Campuses), luxuryrehabs.com (owned by Seasons Recovery), or addictioncenter.com (owned by Beach House Recovery). While they appear to be unbiased sites offering free information on addiction treatment, all calls actually route to the specific treatment center’s call center, where they try to get them into their own program (quite recently, with all the new law changes, the sites have added information regarding true ownership of the site, but this was not there for most of its history). Note that this isn’t illegal, but is considered deceptive by Google and Facebook, so LegitScript will not approve verification for these centers.

Because competition was so fierce, even shadier tactics began to be used. Some marketers would hijack Google phone numbers. They’d request an edit to a programs main number and, if the program wasn’t paying attention, Google would accept the edit request. So you might think you were calling Betty Ford, but you’d actually be calling some random marketing agency. Or, agencies might just blatantly run an exact copy of an ad for Betty Ford, but put their own number in it, like the example below, which would have the same effect.

Google Ad Hijacking

This was a real Hazelden Betty Ford Ad, but the number was for another center who stole it.

As patient-brokering got more attention in the media and some centers started to shy away from it, marketing agencies would just hide what they were doing. They’d claim to run Adwords or TV spends for a center, but they’d actually just engage in patient brokering and send a center a certain number of admits each month while falsifying reports of actual marketing activity.

Google Shuts Down Adwords

An important note for those not familiar with the industry is that Google literally shut down Adwords with absolutely no warning in September of 2017 due to large concerns around how it was being used by shady marketing agencies and shady addiction treatment operators. Facebook followed suite in the summer of 2018.

Adwords was not brought back online until June of 2018 and, even then, only a handful of centers that had been approved through Google and Facebook’s new verification partner, LegitScript, were allowed to market their programs.

Google also updated its search algorithm at this time, pinning the website for the National Institute of Drug Abuse to position one for any searches related to addiction treatment.

Another algorithm update, called the Medic Update, followed in the summer of 2018 that prioritized information sites over for-profit sites for numerous search terms. It’s unknown if Google has incorporated additional variables specific to the addiction treatment industry in terms of how it displays results for related searches, but I find this possibility to be highly likely.

Where Addiction Treatment Marketing Is Today?

As we approach the end of 2018, these are the historical forces that have shaped the field. With new federal laws against patient-brokering, wider awareness by the general populace of the many shady operators in the field, and strong disapproval by legitimate operators in the field, many programs are trying to navigate the transition and figure out how to survive.

There has been a recent trend in the hot spots of FL, CA, and AZ to suddenly have a change of heart and want to engage in “ethical marketing practices.” Not surprising since they face federal prison time and the business being shut down if they do not.

The field as a whole is struggling with this. On the one hand, it’s great that the preying on people only in the pursuit of profit is going away. On the other hand, the question remains if the field should be forgiving to those who engaged in such activities, especially since the change of heart seems to only run skin deep and again be motivated solely by the pursuit of profit.

Most centers actually don’t know how to operate in this environment. Even if they did run a quality program, many still relied on Adwords and SEO tactics, reaching only the people in absolute crisis that needed support. They were also used to much larger profit margins, so the lowered reimbursements and greater challenge of maintaining census has pushed even some of the largest operators such as Elements Behavioral, Sovereign Health, Morningside, and Klean Treatment Centers into bankruptcy.

Additionally, a staple of addiction treatment marketing was business development relationships with other centers. Maybe your center couldn’t take a Magellan policy and another center couldn’t take Cigna. Well, you would simply trade referrals giving the other center a policy you couldn’t take in exchange for the same from them.

However, since so many centers in hot spot areas were relying on shady marketing tactics, whether they realized it or not, these referrals started to dry up as new laws came into place and Google restricted addiction treatment marketing. It should be noted here that many good programs engaged in these practices without knowing it. Due to a general lack of business savvy in the field, they may have contracted with a marketing company promising them admissions for a very reasonable cost without asking questions about where those admissions came from.

There was also a lot of pressure on internal teams. The intense competition had made it very hard to find new clients. The average tenure of a marketing professional or business development rep in 2017 in South Florida was less than 3 months. Either you brought in admissions almost immediately, or you were fired. So even internal marketing departments were engaging in patient brokering to make their numbers and keep their jobs, even if the leadership team was unaware (and was failing to bother investigating where admissions came from. It should be noted that treatment center operators are legally responsible under the new federal law for any illegal activities performed by their own staff or 3rd party agencies, even if they didn’t know what actions these agents were taking).

Fundamental Changes in the Addiction Treatment Industry

As a result of all of the above, the general populace started to shy away from destination rehabs where they were no longer sure they could trust the place they were sending a loved one to. The high point of negative publicity came when John Oliver did an exposé on the state of addiction treatment in the US. This was preceded by an extensive exposé in the New York Times. Those drug users for whom it had become a lifestyle to hop from center to center were also no longer eligible for treatment. And, overall reimbursements had dropped significantly down to levels where owning 100 acres, a swimming pool, and a marble lobby were becoming unaffordable.

Centers can no longer solely depend on crisis calls through Google Adwords or good SEO. They can’t contract with shady 3rd party marketing agencies who will just deliver admits through patient-brokering, and many of their referral partners have either closed down or stopped sending referrals.

The fundamentals of marketing and operations has shifted to a more standard health care model, one dependent on building up long-term trust among communities and groups likely to need treatment. While Adwords opened up again for advertising in the summer of 2018, centers now need LegitScript verification to prove they are a legitimate center providing quality treatment.

However, costs remain very high for Adwords campaigns, still as high as $4,000-$10,000 an admit, which is no longer sustainable for a center receiving $15,000 or less as reimbursement. This means, like any other health care business, that fixed marketing spends as a percentage of revenue need to be allocated over the long term using targeted campaigns with consistent messaging.

For operators who were used to starting a marketing campaign and seeing immediate returns, it’s difficult and confusing to suddenly be in an environment where returns on ad spend (RoAS) aren’t seen for six months to a year or more.

During the Adwords and patient-brokering heyday, you could start a center with less than $50,000 in capital and be profitable in 3 months. Nowadays, you can’t start a center without at least a million dollars in capital and achieving profitability within 18 months of opening would be an impressive feet.

All of this drama affected the legitimate operators as much as the shady ones, in many cases even making it harder for them. If you’re a center that follows the law and doesn’t waive deductibles or pay for flights, it’s very hard to compete with centers who do.

Many people and families struggling with addiction can’t afford a $2,000 deductible on top of flights to and from treatment. Even if they believe that another center may be better, they’re simple more likely to go with the lower cost option in some cases. The bad publicity all of the illegal activities generated also cast a shadow on the field as a whole, whether a program was engaging in those activities or not.

While many who have been in the field for a long time already understand this history of addiction treatment marketing, hopefully this article was helpful to those newer to the field. The question than remains, if all the marketing eggs shouldn’t be in the Adwords or SEO basket, and if business development referrals are still taking longer than they used to, what do you do? A good place to start would be Where the Hell Should I Market My Rehab in 2018? Stay tuned to this spot for the 2019 article coming up soon. Or, if you want help now, get in touch through the form below.

 

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About the Author

Nick Jaworski is the Chief Growth Officer of Circle Social Inc. Seeing a real need for innovative, ethical recovery center marketing and growth, he launched Circle Social to help the best addiction treatment centers connect with people who needed their help the most. He is also the proud father of the most beautiful girl in the world. You can most often find him sharing thoughts on digital marketing and cracking jokes on Twitter or Snapchat as @NBJaworski.

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