Mental Health and Addiction Recovery is Big Business

Updated on

Mental Health and Addiction Recovery is Big Business — But Consider These Factors Before You Invest

Get Our Activist Investing Case Study!

Get The Full Activist Investing Study In PDF

Q1 2021 hedge fund letters, conferences and more

Perspective from Colorado-based Eric Lapp, founder of The Raleigh House, on current approaches for maximum success

Investment In Mental Health And Addiction Recovery

There is no question that investment in rehabilitation from drugs, and  alcohol is big business in the United States, accounting for $42 billion in 2020 according to the latest research There are more than 14,000 treatment facilities in the U.S. that have provided treatment to some 3.7 million individuals. Inpatient facilities are filled to capacity and insurance coverage continues to rise in spite of scandals due to shoddy facilities, patient brokering, overbilling and deceptive marketing. Private equity firms and individuals are continuing to invest even in the face of COVID challenges and increasing patient volume.

However, the rising issue currently facing the U.S. and the rehabilitation and recovery industry is the “second pandemic”  -- the need for focused and effective mental health treatment from the direct and indirect impacts of  COVID. Depression, anxiety, loss and uncertainty are rapidly increasing the need and demand for effective mental health treatment.

According to Dec. 20, 2020 results from the U.S. Census, as COVID-19 cases rise, 37 percent of U.S. adults are reporting significant levels of depression. Even more concerning, the survey reports that more than half of adults under 30 report feeling hopeless more than half of the time, and younger adults are the most likely to indicate needing, but not receiving, counseling or therapy.

Why is this sector so important? We need only to look at the economic and cultural impacts of addiction to understand why the recovery industry is an important industry to support and to enter. The economic impacts alone validate the constant and evolving need for treatment in this country: The National Institute on Drug Abuse (NIDA) estimates that abuse of tobacco, alcohol, and illicit drugs costs the U.S. economy more than $700 billion annually in the form of crime, lost work productivity and health care. When we add to these costs the impact of mental health, the results are even more staggering. According to data from the American Psychiatric Association, employees with unresolved depression experience a 35% reduction in productivity, contributing to a loss to the U.S. economy of $210.5 billion a year in absenteeism, reduced productivity, and medical costs.

What Is Needed Now

The need for mental health and addiction therapy is on the rise, and treatment facilities are struggling to keep up with the rapidly evolving science, therapies, and treatment modalities people need. Not only is the current landscape changing, but operations like The Raleigh House, in Colorado are helping to redefine what it means to go into treatment, and identify the reasons that indicate participants should go.

According to Eric Lapp, founder of The Raleigh House and an self-made businessman and entrepreneur, the level of support in many facilities is insufficient.

Effective treatment requires centers that are able to operate as well-organized and highly-systemized businesses, which is an ideal space in which effective investors can make a significant difference.

The impact a well-organized and operated facility can have on individuals is huge, according to Lapp. While this may be true, the younger and home-grown facilities emerging frequently tend to lack the level of infrastructure and leadership to provide clients with optimal care. Not to mention, the impact a lack of organization can have of the bottom line of business, which can, and often does, alter the levels of care facilities feel they can offer,

“We see many facilities needing to put their primary focus on managing the business, instead of focusing on their ability to provide their customers (the facility’s clients) with optimum care,” he maintains.

For investors it is vital to find and select facilities that are highly systemized with strong process and organizational skills. Ideal investors, he notes, have high sensibilities in these factors as well as strong investment and venture capital skills. When both of these needs come together, it provides a win/win for investors, facilities and effective outcomes for in-house clients and recipients of treatment.

“Each of us could make a list of the people close to us who are suffering,” Lapp says. “Anxiety, depression, trauma, PTSD and uncertainty is everywhere. We need only look at our own families and friends to get a glimpse at how personal and pervasive the need has become for qualified mental health and addiction support. ”

Personal experience has been a strong motivation for Lapp. He launched The Raleigh House mental health and substance abuse center, one of the largest privately-owned facilities in Colorado, 13 years ago in 2008. The genesis of the business was his own life experience, coupled with incredible business abilities, deep insights and a unique gift and passion inspiring others. As observers have noted, Lapp is known for a relentless pursuit of the creation of unique systems that encourage and inspire positive change.

Through creative process, science and newer evidence-based practices, Lapp has used his entrepreneurial mind to imagine a holistic and integrative program to address all of the  interdependencies and individual needs to allow participants (and programs) to achieve lasting success.

The Solution: East Meets West

In his own facilities, Lapp and his team have developed a unique blend of science and traditional modalities to support effective outcomes. Since its inception in 2008, the Raleigh House has treated more than 3,000+ patients, with a team of approximately 100 members. The Raleigh House places a strong emphasis on nutrition, but also recognizes that medication may be necessary as well. With an “East meets West” philosophy, the program supports stabilization, medically assisted detox, 24 hour medical care and integrative care for long term success.

The combination of evidence-based treatments with new and complementary modalities joined by traditional medical models is a winning formula for the organization, which is helping its patients to achieve dramatically higher levels of long-term success. The program’s multiple locations support a full continuum of care for both inpatient and outpatient treatment. The Raleigh House places a strong emphasis on treatment of  attachment wounds, depression, anxiety, trauma, PTSD, substance abuse and other co-existing disorders. Additionally, the program includes equine-assisted therapy. There is a rock climbing wall and exercise and nutritional treatments in a supportive community in the idyllic surroundings of nature. and a depression/anxiety facility coming soon, Lapp reports,

Lapp acknowledges the difficulty of self-funding a recovery facility from inception to success, but after 13 years is profitable and achieving reasonable margins, and more importantly, has created an incredibly strong and integrative program that is both a personal and a business success.

Should You Invest In Mental Health And Addiction Treatment?

For individuals or institutions, there are five critical questions to ask before investing in addiction recovery according to addiction therapy resource site

  1. Know that many substance abuse and mental health treatment centers face challenges in capitalization. Many are undercapitalized, and surprisingly fewer are highly profitable. Consider your investments accordingly.
  2. Quality of clinical care is paramount. In an industry that is fraught with unqualified or less than ideal practitioners, the level and consistency of care and the success statistics of participants is paramount.
  3. Business process is supremely important. Examine the facilities ’use of an EMR, CRM, revenue cycle management, and of course, compliance. Lapp agrees, noting that structure, organizational charts, and most importantly the quality of and abilities of the management teams are vital as well.
  4. Deals for treatment facility investments move quickly. The time for lengthy due diligence that is feasible for many other industry sectors may not be a possibility here. Do your homework thoroughly but also quickly if you plan to invest in this sector, as the best deals will often close fast. If you hesitate too long, you’ll miss out.
  5. Know that the addiction treatment industry is experiencing consolidation. New business process technology is evolving quickly and can make a vital difference in the profitability and the long-term viability of the facilities you acquire. Choose your targets with care.

This model has been a winning formula for The Raleigh House’s facilities so far. What’s next on the agenda for Lapp? An increasing focus on education and awareness of the organizational strengths and the emerging approaches and modalities for mental health wellness and recovery treatment. Overall, he hopes the success and evolution of The Raleigh House will inspire the myriad of other facilities in this country to grow and evolve with the changing times. The Mental Health Crisis is here. Now is the time someone stood up with proven business processes and clinical insights on how to combat these complex health issues.