Health systems are investing significant capital in residential facilities designed to treat alcohol and drug use disorders

Health systems are investing significant capital in residential facilities designed to treat alcohol and drug use disorders in response to increases in opioid misuse and drug overdose deaths. Expanded insurance coverage, favorable health policy changes, and new funding opportunities are also driving this trend.

Scope of the addiction crisis

More than 72,000 Americans died from drug overdoses in 2017, including illicit drugs and prescription opioids, according to the Centers for Disease Control and Prevention. In other words, the number of deaths involving drugs has more than doubled in the past decade. Emergency department data also show suspected opioid overdoses increasing 30 percent from July 2016 through September 2017 in 52 areas across 45 states.

Residential treatment finds a foothold in new markets

The crisis has prompted health systems to step up their efforts to address addiction. Among these efforts are on-site residential treatment facilities, which are emerging as an opportunity for hospitals to redirect care away from the emergency department. The profitability of residential treatment, which can cost $10,000 per month on the low end, to the low six-figures on the high end, is also a factor driving this trend.

Earlier this year, MountainStar Healthcare’s Ogden Regional Medical Center in Utah began offering 30- to 90-day treatment options for substance abuse at the newly built ACT Residential Center on the hospital’s campus. The residential program costs about $600 per day.

Sioux-Falls, South Dakota-based Avera Health is also expanding its level of behavioral health services to include residential treatment, with plans to open a facility in mid-2019 on the Louise Health Campus.

In Oklahoma, construction is underway on a $46 million addiction treatment center called Arcadia Trails on-site of Integris Health’s Edmond campus. A 90-day stay at Arcadia Trails will cost about $56,000.

More favorable funding environment for addiction

The uptick in residential treatment also comes at a time when the federal and local governments are creating a more comprehensive insurance coverage environment available to fund treatment. The Affordable Care Act, which expanded health insurance coverage to an estimated 20 million people, also mandated plans on its exchanges to offer substance use disorder benefits. The passage of the Mental Health Parity and Addiction Equity Act generally requires health insurers to provide the same level of benefits for mental and/or substance use services that they do for medical/surgical care.

Thirteen states have also gained waiver authority to use federal Medicaid funds to pay for substance use treatment services provided at residential addiction treatment centers, circumventing a federal law known as the Institutions for Mental Diseases exclusion that currently prohibits this practice. As of September 2018, more than a dozen additional IMD SUD waiver requests are pending with the Centers for Medicare & Medicaid Services.

Looking ahead

The increasing prevalence of substance use disorders, plus the significant demand for treatment, along with recent health policy changes and increases in funding, together provide ample opportunities to increase access to care for alcohol and drug use disorders. Lifting the IMD exclusion further holds out the potential that significant funding for substance use disorder services will be available to more states in the years ahead, positioning residential treatment for new growth.

Nicole Witowski is an associate analyst at DRG and a behavioral health expert. Follow her on Twitter at @NicoleWitDRG.


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