According to Adam Nesenoff, Lake Tikva’s recovery has changed for the better by “stopping 20-year-olds from using cell phones.”
Nesenoff has co-invested in Tikva Lake with his brother David Nesenoff since 2016. The facility is a residential addiction treatment center located in Sebring, Florida. More specifically, the facility bills itself as a high-end rehabilitation center and charges patients up to $85,000 a month for their stay, Adam Nesenoff said.
Nesenov explained that patients who pay that much, often mostly out of pocket, are worth more than the bored-looking young man at the reception desk. With that in mind, Lake Tikva has a concierge service that aims to “anticipate guests’ needs in advance,” Nesenov said. No one wants patients to “complain about toilet paper during treatment instead of dealing with deep trauma.”
Investors like the Nesenovs are rare in the addiction treatment business these days.
Because all high-end rehabilitation centers in the United States are privately owned, it is difficult to ascertain how many providers are thriving or struggling to survive. However, due to scandalous and simple reasons, trade in this sector has declined sharply over the past decade, with no hope of recovery.
“Luxury rehab has probably reached maturity,” Brad Mostowy, vice president of Fifth Third Securities, Fifth Third’s healthcare investment group, told Addiction Treatment Business.
fly-in country
Gourmet chefs, masseuses, acupuncturists and sparkling pools are the epitome of luxury rehab, but perhaps its most important feature is its tranquil location.
“Facilities have historically been in places like Malibu and Miami, and people fly in,” Rebecca Springer, lead healthcare analyst at Pitchbook, told ATB.
Lake Tikva is a “luxury healing sanctuary.” Another upscale rehab center, Annandale Behavioral Health, offers “tranquil, private accommodations located in beautiful Pasadena, California because we understand the interconnectedness of nature and wellness.”
This idea is an outgrowth of the 80-year-old “Minnesota Model” for addiction treatment, which assumed that recovery can be achieved by staying far away from the problem. This model served as a template for addiction treatment for decades.
So when investment in addiction treatment increased following the Mental Health Parity and Addiction Act of 2008 and the Affordable Care Act of 2010, funding went to treatment centers in the tropics.
American Addiction Centers, headquartered in Tennessee, struggled to survive as a publicly traded company that bought treatment facilities in California and Florida, but other investors with a focus on the high end followed suit. For example, in 2018 Discovery Behavioral Health acquired Cliffside Malibu, a well-known treatment center whose previous patients include Lindsay Lohan.
At the time, Cliffside Malibu was charging $68,000 per month per room. Investors attributed the impressive revenue per patient to the high profit margins. In the mid-2010s, higher-end housing counseling was more popular than more affordable housing counseling or outpatient counseling, according to data from the Bluff Group, a Pittsburgh-based healthcare mergers and acquisitions advisory firm. It is said that there were more people.
“The first wave of substance use disorder treatment consolidation focused primarily on high-end providers for margin considerations,” said Dexter Braff, CEO of M&A advisory firm The Braff Group. told ATB in an email.
However, as investment increased, so too did oversight. As early as 2014, an article in Medical Care magazine noted that for-profit facilities are “significantly less likely to provide comprehensive services than nonprofit or public programs,” and that the science behind residential treatment centers is The rigor was questioned.
Sometimes unorthodox high-end treatments also encountered certain scandals. Christopher Bassam, who operated treatment centers near ski resorts in Southern California and Colorado, was convicted in 2018 of sexually assaulting seven female patients. Batum’s center, called Community Recovery, featured art therapy through an art studio and recording studio.
In 2019, a Los Angeles jury found that Cliffside Malibu, under previous ownership, created a fake news website to promote its benefits and disparage competitor Passages Malibu. . A judge later reversed the ruling, finding that the plaintiff, Passages Malibu, also engaged in rampant false advertising.
While these examples are extreme, she says, “questions about clinical effectiveness” are beginning to haunt luxurious treatments, just as alternative treatments such as partial hospitalization and intensive outpatient treatment have begun to emerge. Springer said.
The new providers promise a “more clinically rigorous model,” including demonstrating the value of staying in one’s community to maintain work and social networks, Springer said.
These models also require less effort to operate.
“The general direction seems to be more outpatient,” Springer said. “Since COVID-19, it has become very difficult to staff residential treatment facilities.”
“High fixed cost industry”
By 2022, the number of mergers and acquisitions in luxury housing will be zero, according to data from Bluff Group. In addition to the aforementioned factors, there is one simple reason for the decline. Upscale centers are having trouble securing contracts with insurance companies to provide in-network services for their patients.
“Insurance companies will not reimburse a significant portion of the treatment,” Mostowy said.
Adam and David Nesenoff, who founded Behavioral Health Acquisitions last year to focus on high-end rehab investments, have been working to change that. At Tikva Lake Recovery and other treatment centers in Avon Park, Florida and Lahaina, Hawaii, insurance may cover some of the costs.
Still, patients often end up paying more than $50,000 a month out of pocket. Adam Nesenoff said facilities are in the process of signing deals to be in the network, but even if that happens, customers will still be limited by price.
Luxury goods, on the other hand, is “an industry with high fixed costs,” Nesnev said.
This is in part due to employee pay, including hiring clinicians who are committed to evidence-based cognitive behavioral therapy, a move that aligns luxury treatment centers with overall trends in addiction treatment. .
Nesenov said real estate prices in the area where the center is located are also high, making expansion difficult.
One way insurance can help, Nesenov said, is by increasing the customer pool “from 0.001 percent to 1 percent.” That way, instead of people flying in on private jets, business professionals from all over the country would come together.
In fact, experts see luxury rehabilitation as a largely dormant investment, but one that retains potential as a niche space and even stability.
“Many high-income lawyers and doctors need privacy and treatment,” Mostowy said.
Nesnev said his treatment center is profitable and he uses the proceeds to operate and invest in high-end rehabilitation facilities.
“In that sense, you could say I’m a contrarian.”