Will Growth, Consolidation Lead Residential Addiction Treatment Industry to Police Itself in Terms of Ethics & Marketing?

By COLBEY REAGAN

At this year’s annual meeting of the National Association of Addiction Treatment Providers in Austin, there was a clear divide on display between the “old school” and the “new school” during a session on electronic marketing strategies.

The number of residential addiction treatment providers operating in the United States has exploded since the passage of the Affordable Care Act in March 2010. Some of the industry growth has been through expansion and M&A activity by providers who have been operating in the addiction treatment space for decades. Other growth has been through entry into the market by operators without the depth of experience in operations but with a passion for providing a much-needed service in an environment where reimbursement opportunities have never been better. With the growth in sheer number of operators providing residential addiction services, came the inevitable competition for patients in need of treatment.

Before the days of Internet marketing, residential addiction treatment providers largely made the public aware of their services through alumni word of mouth and relationships formed between providers and other referral sources. The opportunities made possible through electronic marketing have greatly expanded providers’ abilities to build regional brands into national brands and reach potential patients from all over the country.

Unfortunately, mass marketing tactics combined with fierce competition for market share have given rise to some of the unsavory (and unethical) marketing practices that are plaguing the industry today. Examples of these practices include trickery such as search algorithm manipulation that may lead a consumer to land at one provider’s marketing materials even though that consumer had searched for another provider. There has also been a rise in seemingly passive “call centers” that appear to present themselves as altruistic sources of help for people in crisis but are really hard-sell marketing operations. Even more questionable practices include online lead aggregators that present themselves as places for patients to get help but are really just collection points for potential patient data that is sold to providers for direct marketing campaigns. Many of the online aggregators even offer pricing models that require payment only if the lead is “converted” into an admission.

Such practices would likely never be able to proliferate in other sectors of the healthcare industry because of their inherent risk under the federal Anti-Kickback Statute. However, most of the new breed of addiction treatment providers do not participate in government reimbursement programs, thus insulating themselves from this type of federal scrutiny. While many states have broad “all payor” statutes that apply the same principles of the federal Anti-Kickback Statute to commercial payors and, in some cases, self-pay patients, these laws are not uniformly written or enforced from state to state. Indeed, in many jurisdictions the state all payor statute might only be enforced through civil suits brought by payors.

All “good” things must come to an end, however, and the addiction industry would appear to be on the cusp of a real reckoning around some of its less savory practices. News organizations such as Pro Publica, The New York Times, and Time magazine are shining the light on poor practices by some industry providers. While the bulk of the media attention thus far has been devoted to issues around patient safety and treatment failures resulting in relapse, aggressive and ethically questionable marketing practices have begun to grab a share of the spotlight. Perhaps more ominous than media attention, commercial payors that have been paying large sums for addiction treatment on a largely out-of-network basis have begun to sit up, take notice, and file recoupment actions. An uptick in enforcement actions, both governmental and civil, appears to be on the horizon, and the overall reputation of the nation’s residential addiction treatment providers may likely be damaged.

Residential addiction treatment providers find themselves at a crossroads. The industry can either take steps now to adopt uniform ethics and marketing guidelines, or it can wait for the legal system to effectively do it for them. Based on the (often heated) sentiments expressed among participants at the Austin conference, now would appear to be the time to bolster the industry’s reputation through self-policing and monitoring so that patients always have confidence in the integrity of the provider they turn to in what is often their darkest hour.


Sep Blog.Growing Pains.Colbey ReaganColbey Reagan is a partner in the Nashville office of Waller Lansden Dortch & Davis. He has deep experience in healthcare regulatory issues and often works with clients in the acute care, behavioral health, addiction, residential treatment, home health, and hospice sectors of the healthcare industry. Prior to joining Waller in 2011, he was deputy general counsel of Psychiatric Solutions, Inc. For more information, go online to www.wallerlaw.com