The Heroin Crisis: A 3-Day Series

Demand is high, but addiction treatment business falls short

  • 3 min to read

BEVERLY — When it comes to the heroin epidemic, nobody disputes the notion that there is an overwhelming demand for treatment. But if the demand is so great, why haven’t treatment centers been popping up like convenience stores?

Experts say one reason is because the business of addiction treatment is not very profitable.

Many people who need treatment for drug addiction are on MassHealth, the state’s Medicaid health insurance plan for low-income residents. According to Kevin Norton, chief executive officer of Lahey Behavioral Health Services, reimbursements for addiction treatment are not high enough to provide the incentive for companies to open new treatment centers.

“To build a new facility costs $5 million to $15 million or $20 million,” Norton said. “You look at the rate you get per bed and you say, ‘Wow, it’s 40 years before I get a return on my investment.’”

Norton said Lahey’s treatment center in Danvers is reimbursed $255 to $285 per bed, per day, by MassHealth, while the cost of providing the treatment is about $275. Eighty-eight percent of the center’s patients are on Medicaid, he said.

Norton said the treatment center operates at a “slight gain,” a less than 1 percent operating margin.

“It covers its debt and all of its expenses, but it doesn’t generate enough revenue to maintain the facility,” he said. “We’re always struggling with ways to generate money to do that.”

State Sen. Joan Lovely of Salem, Mass., who serves on the Legislature’s committee on mental health and substance abuse, agrees that reimbursements for substance abuse treatment should be higher. But with MassHealth already accounting for one-third of the state budget, finding support for rate increases is difficult.

“It’s been tough to push those numbers north,” Lovely said. “I’m supportive of it. It’s being heard loud and clear. It’s the numbers and making it work.”

Two new treatment centers are in the works for the North Shore, but they won’t accept clients on MassHealth or Medicaid. A for-profit company called Recovery Centers for America is planning to open a 228-bed center at the former Hunt Hospital in Danvers and a 158-bed center at Penguin Hall in Wenham.

Brad Greenstein, the head of Recovery Centers for America’s New England area, said the company will only accept patients who have commercial insurance or who pay on their own. He said reimbursements from MassHealth patients would not be enough to support the company’s investment in Danvers and Wenham.

“The state is not able to pay enough to incentivize new providers to come on-line,” he said.

Greenstein said the company intends to operate in Massachusetts on a “large scale” and might be able to accept MassHeath and Medicaid patients at some locations.

“We don’t want to turn anyone away,” he said.

Recovery Centers for America has also run into opposition from some Wenham residents to locating the treatment center at Penguin Hall, which is next door to a preschool and near town soccer fields. The matter is pending before the town’s Zoning Board of Appeals.

For-profit treatment centers will benefit from a new state law that goes into effect Oct. 1 requiring commercial insurance companies to reimburse addiction treatment services delivered by a licensed alcohol and drug counselor.

Norton criticized the for-profit model of addiction treatment, saying patients will not be getting the range of services that are available in an established health system.

“Providing addiction treatment care in the absence of the rest of the medical continuum is a set-up for failure on the part of the client,” Norton said.

Attorney General Maura Healey said more needs to be done to make addiction treatment accessible for anyone who needs it. She said the state should be looking at locations such as jails and former state hospitals where beds can be made available.

“It should not be the case that people have to leave the state for care,” Healey said. “People are begging the courts to get them into treatment. We need a cultural shift in investment in mental and behavioral health.”

Lovely said the state increased the number of treatment beds last year, but it’s still not enough. For the fiscal year 2016 state budget, the Senate has proposed $10 million to fund a range of treatment services and $5 million for 150 new “clinical stabilization” beds.

“I get at least one phone call a week from a family that’s at the end of their rope trying to get their loved one into treatment,” Lovely said. “It’s a lifelong struggle and fight for people.”

Lovely said the phrase “treatment on demand” doesn’t necessarily refer to immediate access to a bed at an overnight facility. The type of treatment required can range from locked inpatient units to outpatient care, access to medications such as methadone, suboxone and vivitrol, as well as follow-up services. Even once people get help, they may relapse several times.

“It’s not a one-size-fits-all approach,” Lovely said. “We need more tools in the toolbox and let’s make some real progress.”

Staff writer Paul Leighton can be reached at 978-338-2675 or

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