About 15,000 mental health and substance abuse facilities operate in the US with combined annual revenue of more than $17 billion. Major companies include The Betty Ford Center, the Richard J Caron Foundation, and Res-Care. The industry is highly fragmented: the top 50 companies account for only about 20 percent of industry revenue. About 70 percent of mental health and substance abuse facilities are operated by tax-exempt organizations.
The industry includes establishments that provide residential and rehabilitation care with minimal medical care, and outpatient facilities with medical staff to provide treatment.
COMPETITIVE LANDSCAPE
Demand for mental health and substance abuse facilities is driven by population demographics, availability of new drugs and treatments, and funding policies of healthcare insurance programs. The profitability of individual facilities depends on controlling costs and attracting physician referrals. Large companies have advantages in group purchasing and in marketing to physician and managed healthcare companies. Small facilities compete effectively by providing superior patient service, integrating treatment with follow-up procedures, and specializing by treatment or demographic group. Mental health and substance abuse facilities are labor-intensive: average annual revenue per worker is about $50,000.
PRODUCTS, OPERATIONS & TECHNOLOGY
Revenue is derived from patient care services (37 percent); government grants and contributions (27 percent); and residential care services (25 percent). Other revenue sources include private contributions and sales of prescription drugs. Tax-exempt facilities receive about 55 percent of revenue from patient care services and ...
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