Congratulations, you’ve made a very important decision to help people struggling with addiction and mental health. Addiction and mental health challenges are complex issues and meeting the needs of those struggling with it is even more complex.
This article will give you an in-depth overview of what opportunities exist and, more importantly as a new provider, the challenges that exist as well. We get into this business because of the opportunities, but if we don’t overcome the challenges, the business will fail.
We can’t stress this enough. Here at Circle Social, we have eyes on the industry as a whole, working with almost all the larger providers across the country and tons of small to medium-sized ones. We’ve seen and helped build it all…or not. Some of our clients start off with a small outpatient and are now approaching their tenth location. Others we’ve helped grow from $100 million to over $300 million in revenue. Our largest client does over $1 billion in annual revenue.
On the flip side, we’ve seen more startup providers close their doors than make it and we’ve seen just as many large providers with locations across the country go completely bankrupt with fortunes changing from on top of the world to doors closed in less than 3 years. With nearly a decade of experience in the space and over $2 billion in data across providers and levels of care, we don’t just know what works and what doesn’t, we’ve lived it and continue to live it every day.
In fact, there is not a day goes by that we don’t get word of or hear from a small provider on the verge of closing, in desperate need of either a way to turn the business around or some foolish individual willing to buy what’s left of their business off of them. This is not an exaggeration. At the time of writing, there is literally at least one mom-and-pop provider closing its doors every day in this country. We say this to drive home the point that a realistic pro forma (business plan) and your ability to execute on it will make or break your business.
The Business Case – Avoiding Obstacles and Planning for Success
We’d highly suggest looking at our market analysis here.
As a very simple market analysis, only about 1% of a population will seek care each year. Half of those are commercially insured and half of the commercially insured are willing to use OON benefits only (that’s .25%).
Residential providers pull from a 150-mile radius while Outpatient providers pull from a roughly 30-mile radius. If there are 1 million people in a 30-mile radius, that means that only 5,000 per year are seeking care, 2,500 of which might use their OON benefits. That comes out to about 208-416 patients per month seeking care.
Are there competitors in your area offering the same level of care? For simple math’s sake, assume they will all take an equal percentage of market share then divide that patient volume accordingly. This is your total addressable market.
If they offer a different level of care, great! Maybe they can become a referral partner. But most providers have been expanding their levels of care, almost all of our successful clients have. So if they are a referral partner now, they may be a competitor in the near future, something that needs to be thought about in the Business Plan.
Marketing: PPC, SEO, and All the Rest
This is where budgeting comes in. Like any new business, the life’s blood of that business is sales. In the case of addiction treatment, we call that patient acquisition. It is very expensive, especially for OON. Looking at our $2 billion in data, do you want to know the average cost of an OON PPC admission? It’s $7,000. For some context, the average 100-bed OON residential program spends $500,000 a month on PPC alone.
What marketing strategies bring patients into our program right away?
There is no magic solution or some inexperienced agency new to the space with all the promises in the world that is going to attract patients for under the cost mentioned above. In fact, because PPC (Google Ads) costs per acquisition are highly dependent on the skills of the person answering your phone, it’ll probably be much higher. New programs often don’t have dedicated phone reps. Instead, they have one of the owners or a business development rep answering while also doing a million other things. This results in 30% or more missed calls. That’s 30% of patients missed because patients don’t wait around for you to call back, they go somewhere else.
Simply by not answering the phone or not having someone experienced and good at talking to patients on the phone, you’re increasing your cost per admission by 30%!
These high patient acquisition costs are why it is so important to go in-network, at which point you can halve your cost per acquisition.
The next question we always get asked is, what else is there besides PPC for quick patient acquisition?
The answer is, effectively, nothing. There are no magic marketing strategies or quick gimmicks that will flood your doors with patients.
Most small providers rely on an existing network. They are often in recovery themselves and have community connections that generate referrals. This is how the majority of new providers start out – by tapping into their existing networks of trust.
Can’t I hire a business development rep with a “book of business”?
Again, the answer is no. Many a treatment provider has opened their doors expecting to hire a business development rep with that mythical book of business which will fill their program with no effort. The reality is that most business development reps, even if they are good at what they do, won’t bring in more than 4 OON admissions a month. Regardless of their time in the field, their amount of experience, or their “book of business”, it will take them 3 months or more to start bringing in those referrals. In fact, Business Development reps bring in 30% more admissions each year they work for the same facility, not when they bounce between facilities. Business development is all about 3-way relationships between providers, reps, and community referral partners. Community referral partners do not automatically trust a new provider just because a rep they trust says so.
What about other channels – Facebook, billboards, SEO, email?
These are all highly effective channels, but not for immediate patient acquisition. SEO takes a minimum of 12 months to start showing efficacy. When it does, it’s the most cost-effective channel out there with cost per admission as low as $500. But you’ve got to be willing to invest the $10,000 a month to get it there. Facebook, billboards, emails, and all the rest work as well, but only as part of broader strategies. They build brand and community mindshare while other channels such as business development, SEO, and Google Ads drive the final admission. These channels all work in tandem, not as a standalone. Each works better with the others in play, but newer providers don’t have the cash flow to be on every channel in their first year or two.
All marketing in behavioral health, from PPC to SEO to Facebook Ads require a high degree of expertise and skill. The local jack-of-all-trades employee or marketing agency that does the car dealership down the street and a dentist up the road does not have the skills or knowledge to run an effective behavioral health marketing strategy. It’d be like having your shop teacher teach health class.
Great marketing for treatment facilities requires a team of experts. At Circle Social, even on our smallest accounts, we have at least 8 people running campaigns. Can you afford to hire 8 full-time staff to run your marketing? What if you paid some random agency $3,000 a month? That’s $36,000 a year, not even enough to hire a part-time staff member. How many experts do you think they’ll put on your account for $36,000 a year? You’ll either get one person who knows a little about a lot, but has no expertise anywhere, or they’ll outsource your work overseas to individuals in India or the Philippines. We see it all the time. The reality is that you either pay to get real results or you pay less where all your money ends up down the drain. Of course, the advantage of an agency is you get an entire expert team to your account for 1/6th the cost or less than you’d spend to hire your own team, but you still need to invest in an agency partner enough to allow them to get the results you need.
What about our website?
This is another area where the inexperienced often try to cut costs, but it’s a huge mistake. Would you go to a doctor working out of a rundown office with paint peeling on the outside? Definitely not. You’d assume they must not be a very quality provider to be in such a rundown building.
Your website communicates, both consciously and unconsciously, the quality of your program. It has to look great.
But great websites are so much more than that. Did you know that everything from the color of your call-to-action buttons to the layout of your menus to where testimonials go on your home page all have massive impact on whether or not a patient will pick up the phone and call you?
They do. We have very sophisticated tools and data from hundreds of millions of website visits that tell us what works and what doesn’t. Just by changing certain aspects of coloring schemes and information placement, we can as much as triple the number of visitors who call.
And it’s not just aesthetics and user experience that drive results, SEO is critical. Most web design firms are really creative and make beautiful looking sites, but these sites aren’t optimized in Google’s eyes to rank for addiction treatment. Those are two completely different skill sets.
Your run-of-the-mill agency used to handling roofing companies, e-commerce, or even local dentists has no clue what works for behavioral health treatment design and SEO. Both large data sets and a lot of experience are needed to create a website that works.
What’s a good strategy for a new provider?
If you’ve got private equity backing or a lot of capital that can afford a $50,000 a month or more marketing budget, that’s absolutely where you should start. Hire a business development rep, start SEO, and pour the rest into PPC.
If you don’t have that much capital available for marketing, then you need to invest in a business development rep and SEO for your rehab while building out your pro forma to expect profitability in about 18 months. The ownership team should also be pounding the pavement and working the phones to build community referral relationships as well. No one can promote your program better than you as an owner.
Slow and steady is what drives business success in the treatment space. If you do this, your business development rep will get better and better, your SEO will gradually start working, alumni will start referring into your program, and community referral partners will be more aware of you and refer more. Those 4 factors together will allow you to sustain operations and eventually become profitable so that you can start investing in other channels and continue to grow.
Clinical Approach – The Holy Grail of a Successful Provider
The reality is that most markets are already saturated with providers. There are more beds or open spots than there are people that need care, this is especially true in markets where reimbursements are good.
The only way to come in as a new provider and succeed is to provide better services than those already existing in the market. If your plan is to open a new facility and do the exact same thing as everyone else, then you need to go back to the drawing board before opening. Even if you’ve somehow managed to find a small corner of the world where competition hasn’t come in yet, they will. And if you don’t have differentiated services in place, then they’ll outcompete you in no time.
Buzzwords are not going to cut it. You can tack on “trauma-informed care”, “evidence-based care”, “dual diagnosis” “holistic” “patient-centered”, and “individually tailored” to your website all you want. It’s the same thing everyone else says. As the old saying goes, the proof is in the pudding. No community referral partners are going to believe any of the jargon on your website or brochures unless you can prove that you’re delivering said care and doing it in a way that’s better than who they’re currently referring to.
How do we create a differentiated clinical program?
First, you need to understand your market. What are other providers doing well and what aren’t they doing well? What do patients want or need that is currently not being provided? Since most patients find a program through community referral partners, talk to the community referral partners even more than you talk to the patients themselves. Then build your program to fill the gaps.
The best laid plans amount to little if you can’t execute. So you then need to work hard to recruit the right clinicians that can deliver upon your vision. We’d go so far as to suggest that you find the clinicians you plan to work with before committing any capital. Clinical delivery and the community of recovery your program builds are the two most important factors that will lead to success.
Recruitment and Retention – The War for Talent Is Real
The behabioral health field is highly competitive. Nurses, business development reps, and therapists are all in very short supply. Just like you’re competing for patients, you’re also competing with other providers for staff.
Did you buy a house on 20 acres of land an hour and a half away from the nearest big city? That’s a problem. Not only are patients less inclined to travel far, staff definitely don’t want to. Last we checked, there weren’t many nurses or therapists living in the sticks and they can find plenty of high-paying jobs in the city, so convincing them to drive 2 hours a day to work and back is no easy lift.
Make sure you’ve done some market analysis regarding the labor landscape. How many of each role do you need, what’s the going rate for wages, and what do staff want that other providers aren’t currently offering, because you’re going to have to attract and retain them while all your competitors are constantly trying to headhunt them at the same time?
The Call for Help – To Admit or Not Admit…
As we mentioned in the marketing section, the role of Admissions Rep, or whatever you title the person answering the phones, is absolutely crucial. This role makes or breaks a program. If the person is overly transactional, if they’re too focused on telling their own recovery story rather than listening, if they shy away from encouraging the person to commit to treatment, or if they don’t answer the phone every single time it rings, your program is unlikely to be successful.
Someone always needs to answer the phone in 5 rings or less. This means a good VOIP system with call routing so that, if your Admission Rep is on the line with another prospective patient and someone else calls, the phone system routes it to someone else, who must answer, even if that means going to the owner’s personal cell phone.
Going Halfway and Cutting Corners Is a Recipe for Failure
A lot of providers will listen to our advice above and say, “Surely there is another way to do this with a smaller capital outlay or by accelerating the path to profitability in less than 18 months.” We assure you, there is not. Countless providers have come to us absolutely convinced that they will be the exception to the rule. They found the right rep with the book of business or the marketing agency that promised them $1,000 admissions (hint, they’re patient brokering).
It is not possible to open even an IOP with less than $1 million dollars. Now, that’s technically not correct. You can certainly open one for between $500,000 to $750,000, but you’ll find yourselves out of cash and trying to raise capital or access loans within 6 months. We’ve seen it again and again. And it’s the same for those coming from outside the space as it is for someone who was previously a CEO at a different facility or that has a bunch of sober livings. Like any business, SUD and mental health treatment is tough. 80% of new providers fail within the first couple years.
What can we do to ensure success?
Follow our guidance above:
- Make sure you have at least $1 million in capital for an IOP and at least twice that for a detox or residential. Runway needs to be at least 18 months.
- Have a differentiated clinical service supported by a strong team that can execute. You need to match services to market needs and gaps, doing something different than your competitors.
- Plan your marketing accordingly. Either have a hefty budget allocated to PPC or give yourself the runway to hire a loyal business development rep and strong SEO agency that knows SUD inside and out (and make sure you’re paying them enough to assign a team and get you the results you need).
- Have a great website. This is how people will view you at first. If it’s not top-notch, 1) Google won’t rank it and 2) visitors won’t inquire after seeing it.
- Have an Admissions Rep laser-focused on answering the phone and who understands how to help people move from contemplation to decision. For advice in this regard, listen to this podcast with James Hadlock.
You don’t want to go this road alone and you certainly don’t want to go it partnered with some random marketing agency that doesn’t know the industry. Some of the biggest providers in the country choose us because we’re strategic partners, not vendors. We’ll not only give you the best marketing in the field, but we’re here to provide guidance and advice around your entire operations. Most importantly, we’ll tell it to you straight. We don’t sugarcoat or tell you what you want to hear. We’ll make sure you get the information you need to make the absolute best decision, every time. We’ve helped over 150 facilities connect with patients in a meaningful way and grow their programs. Give us a call and we’ll help you do the same.
Email: engage@circlesocialinc.com
Phone: 800-396-9927