Health reform law drove Hazelden-Betty Ford merger

Two motivations drove the recent marriage of Hazelden and the Betty Ford Center, addiction treatment giants whose network spans 15 care sites in nine states.

By joining together, the institutions think they will be able to run more efficiently, with greater capital investment capabilities. But they also aim to position themselves to capture a greatly expanded market, as the Affordable Care Act requires insurance coverage for drug and alcohol abuse treatment.

"The general perception is that under the ACA there will be a big new market for addiction treatment," said Dan Cain, president of the Twin Cities-based substance abuse treatment program RS Eden.

Combining Hazelden, which is based in Center City, 45 miles northeast of Minneapolis, with the California-based Betty Ford Center probably was not necessary for either institution to succeed under the ACA, said Leemore Dafny, a professor of management and strategy at Northwestern University. The merger, she explained, looks to be a continuation of a national trend in health care in which organizations join forces to "expand their regional and national footprint."

For patients and taxpayers, the Hazelden-Betty Ford merger illustrates the delicate balance that must be struck between economic effectiveness and costs of care, said Eric Campbell, research director at the Mongan Institute for Health Policy at Harvard Medical School.

"To the extent that you can combine and lower overhead, I could see how you could get efficiencies while keeping the quality," Campbell said. "The question is where do mergers become anticompetitive" by monopolizing markets.

In the case of addiction treatment, there appears to be a big untapped market.

Before health care reform, studies showed that roughly 80 to 90 percent of those with alcoholism and drug problems were not being served, many because they had no health insurance or the insurance they had limited mental health coverage.

With government-mandated parity in the coverage of physical and mental health services, millions of people who need addiction treatment may now be able to get it, said Mark Mishek, president and CEO of the newly titled Hazelden Betty Ford Foundation.

"What drove this [merger] was reaching more people," he added.

The new foundation will have the financial power to leverage major investments in areas such as electronic medical records, according to Mishek. That spending will allow the foundation to partner with so-called "accountable care organizations" that are a new wave in health care generally, but that also will manage many more people's care under health reform.

Cain, who has 34 years experience in the chemical dependency field, believes the Betty Ford Center, named for former President Gerald Ford's wife and widely recognized as the rehab facility for celebrities, "gives Hazelden more visibility" at a time when "a number of boutique [addiction treatment] programs have sprung up throughout the country."

"The Betty Ford Center has an incredibly strong brand," Mishek said in an interview, "much stronger than Hazelden in the consumer market."

However, experts say that the center's image has suffered from fights between its board and the Ford family since Betty Ford's death in July 2011. Hazelden, the older of the two institutions, they add, is highly respected in the rehab community for its training and education programs, as well as its treatment system.

Both facilities employ 12-step abstinence-based recovery regimens that treat addiction as what Mishek called "a chronic disease that can be managed over a lifetime."

Mishek thinks some of the newly minted and heavily advertised programs that offer to "cure" addiction exaggerate their claims. Addiction treatment "is a place in health care where there's a lot of quackery going on," he said.

The new Hazelden Betty Ford Foundation will look to increase the outpatient services it provides, based in part on the fact that the Affordable Care Act mandates insurance coverage for that kind of treatment. Hazelden and Betty Ford are best-known for inpatient treatment of those with generous insurance plans or personal wealth, Cain said.

As health reform takes hold, the foundation hopes that federal regulators will include what is called "day treatment" as a coverage option, Mishek said. That is a not a residential program, but one where addicts spend six hours a day in treatment, Monday through Friday.

Cain, whose company works treating addicts in poor communities and prisons, hopes the Hazelden-Betty Ford commitment to outpatient treatment will make the new foundation more inclusive of all kinds of substance abusers than the individual institutions were.

He is especially interested in having the two biggest names in treatment more involved in defining addicts as people who are sick, not as criminals.

"There's been a sea change in re-criminalizing addiction," he said. "I would welcome Hazelden and Betty Ford at the table for that debate."

Jim Spencer • 202-383-6123