Not just the small providers, but huge operations like Sovereign Health and Foundations Recovery Network are struggling to keep census above 50%. Obviously, Sovereign is well known for some of its problems, but looks like things are worse than ever as they haven’t paid many employees for weeks. So if your center is in this boat, you definitely aren’t alone.
What’s going on? There are certainly the same number of people seeking addiction treatment, so that’s not the issue. There are actually 3 main driving forces of the current scarcity. We’ll cover the causes of these current market conditions as well as ways to address them in this post.
The reality is that people are still building new treatment centers even as insurance reimbursements continue to drop. This is creating a larger pool of competition for an ever-shrinking amount of revenue.
Where you once used to be able to bring in inbound marketing leads for $3,000-$7,000 almost like clockwork, it’s very hard to consistently bring in anything under $5,000 these days and many centers are seeing in the 10K+ range.
The real difference that we see with the centers we work with who still can bring in admissions on the lower end are related to their online reputation and their focused marketing efforts to very specific demographics or locations.
The days of running direct response marketing for addiction treatment is almost over, if not already gone. As centers who have turned to Bing Ads or increasingly convoluted strategies to avoid current Adwords restrictions have found, cost per admits are still very high, usually above $7,000. As more and more centers move to in-network policies, this remains an untenable long-term strategy.
In a very interesting case study with one of our clients, we had started running a new Facebook campaign with inquiries coming in at $30-$40, as is still fairly standard. They had an issue where their Google Reviews suddenly disappeared and their images on their Google My Business account reverted to street view.
Literally overnight, inquiries stopped. It wasn’t that cost per inquiries rose or that inquiry volume dropped, it literally died off completely. Once we got the issue fixed about a week later, inquiries started coming in again.
What this shows very clearly, and what we’ve been telling clients for a long time, is that your online reputation – your brand, is a huge driver of the failure or success of any marketing campaign. Even with Adwords, we’ve tracked on the backend that people clicking an Adwords ad will leave the landing page, research the online reviews, then call the number from their regular website (we setup unique tracking numbers for campaigns to determine results, so each landing page or campaign has a different number associated with it, allowing us to determine not just where the final call came from, but often where they originally found the center).
Branding and reputation management has become critical for any treatment center. This is normal in every other industry or field. Addiction treatment is still a very immature market and it has enjoyed high profits with little competition for nearly two decades. As the market matures, competition increases, and customers/patients become savvier, normal business rules begin to apply, which is catching many center owners and directors off guard.
Branding is much more than having positive online reviews though. It’s directly related to the amount of familiarity and trust a potential patient has with your center. If the only thing they know about you is what they’ve seen from a single Facebook, Google Adwords, or Billboard ad, that is simply not enough to build trust. Potential patients need to have seen your center multiple times AND across platforms. As we’ve written before, single channel marketing is dead in the treatment space. You need to set up integrations across channels to capture patient attention and trust.
What’s even more important is focusing your marketing spend on particular demographics or areas. It’s now cost-prohibitive to run national marketing campaigns. You need to choose demographics or locations and invest time and expense to build up trust with those specific groups or in those specific areas in order to drive down long-term cost per inquiry and cost per admit.
Before, you could rely on people being in crisis, doing a desperate Google search, and finding your center. As we’ll get into shortly, that still exists to some degree, but has dropped off drastically due to an increased distrust of the field overall.
Bad Press Is Hurting Everyone
Story after story has come out in both local and national news outlets regarding the shady operators in the addiction treatment space. Right here in our own Indiana, we just had someone arrested for the typical South Florida scams, John Oliver did a special segment, our own CEO was quoted in a story here in the Orange County Register, and huge publications like the New York Times are writing extensive exposes on the shortcomings of the field.
This, on top of high relapse rates after treatment, have bred distrust with the field (one way to combat high relapse is with continued, ongoing support. We recommend listening to our podcasts on alumni engagement and alternative peer groups to learn more about those strategies),
So while the same number of people still need treatment, both self-admits AND their loved ones are more reluctant than ever to send them away to a high-priced treatment program that they’re concerned may not actually help at all.
Increasing healthcare costs and higher deductibles have also played a big part in this. It’s harder and harder for most Americans to find an employer willing to provide family coverage without at least $5,000 in out-of-pocket expenses per year.
Before, when insurance paid better, there was much less risk on the patient end. In fact, far too many centers relied on this as a sales tactic. Rather than really convince the family that their center was the best place for them or their loved ones, they promoted the fact that treatment would come at “no or little cost.” It’s just another way of saying, “You’ve got nothing to lose, might as well try us,” which is not very convincing when I’m looking at paying $5,000+ out-of-pocket.
A Move Away from Luxury and Destination Rehab
Related to both increased competition and bad press, now more than ever, people want to stay close to home for treatment. Previously, there were not local treatment options, or at least not good ones, so it was common to fly to Florida, California, or Arizona.
But now, owners have gotten smarter and decided the best way to compete with the overcrowded marketplaces in those states is to simply move away into untapped markets where there is no competition. This is a particularly smart move as centers move in-network as well.
People also feel much safer staying or sending a loved one close to home. All the horror stories they see in the news about shady operators make it very scary to send a loved one far away. When they stay close to home, it’s easy to visit the center in person, stop by for visits, and follow local news stories to know their loved one is in a good place.
What’s the Solution?
Focus on Cutting Waste and Driving Operational Efficiency
First of all, centers need to develop a very high level of operational efficiency. When we first start working with a center, we often sees tons of money just bleeding out in terms of poor inquiry response and follow-up, high staff turnover costs, over-reliance on outbound marketing, bloated budgets for amenities and other non-clinical costs, and poor staffing ratios.
This is why so much of our success with clients is focused on operational issues, not just inquiry tracking and generation. With the sky-high insurance reimbursements disappearing, centers cannot afford to be wasting money due to inefficient operations or poor admissions processes. Every dollar counts.
Build Your Brand with Targeted Audiences
Get very targeted in who you’re trying to reach, get to know them, and focus on building trust long-term. This will take a bit to get going, but pays off in spades. Start with alumni and current referral partners, then build into target demographics and areas.
The smartest way to do this is focus on people and areas where you already have a strong presence to build off of and, ideally, where you have an edge in clinical expertise that others don’t. You want to differentiate yourself. Maybe you have clinical staff who are veterans themselves or are very experienced working with veterans. Then you want to focus on that demographic first. It’s very expensive to try to push into new markets and demographics, but comparatively cheap to build out ones where you’re already successful.
Focus on Clinical Excellence
This is a huge part of both success for your patients and marketing. Stop advertising your yoga classes, organic chefs, and luxury lobbies or locations. Insurance reimbursements are not going to cover these extravagances anymore and most patients or their loved ones are very serious about their recovery. They don’t care about your center’s amenities, they care about how your program will help them in their recovery. Spend money on specialists, not spas.
A big part of this is tracking your clinical outcomes. If you haven’t already, that needs to be set up now if you want to keep insurance reimbursements high and maintain your JCAHO accreditation. Need help with that? Check out our podcast on the topic.
Having a focus on clinical excellence and then tracking the outcomes to use in marketing is a HUGE step forward in combating all the bad press the field is currently receiving. If you can prove that what you do works or at least works better than other programs, you’ll be miles beyond the competition. Remember, people really don’t want to travel for rehab anymore, so you need to give them a really good reason to do so.
It’s not easy out there right now and the current conditions are going to make or break a lot of centers. We’re going to continue to see those that don’t engage in long-term strategies now burning through cash reserves and closing down. For those who do make it through these lean times, you’ll be well positioned to capitalize on an environment with much-reduced competition.
Most centers do not know how to do this on their own. Reach out to us and we can help make sure your center isn’t one of the ones that needs to close and weathers this storm to come out on top.