The Opioid Crisis Response Act of 2018 is intended to tackle many of the key issues underlying and exacerbating the opioid addiction epidemic but not without implications to the industry.
In the United States over 115 people a day die from an opioid induced overdose and 2.1 million Americans suffer from an addiction to opioid prescription medication and illicit drugs, such as heroin. There are implications that directly impact privately owned healthcare facilities dealing with recovery and treatment if the Opioid Crisis Response Act of 2018 becomes legislation. Some of those implications are the following:
• A reduction in demand, due to the investment in research to find alternative, non-addictive drugs to address pain.
• A reduction in demand with the requirement for many prescription drugs, including opioids, to include treatment durations.
• A push for treatment of opioid addiction to the outpatient setting by improving access through telemedicine and low-cost providers utilizing Medication Assistant Treatment (MAT).
• A need to restructure the current operating model based on government-set best practices that are implemented through comprehensive opioid recovery centers and recovery housing guidance measures.
• A dynamic market shift potentially threatening the viability of the for-profit sector through the increase in government support of the non-profit sector and services associated with the journey through treatment.
Magnitude of the Problem
The opioid epidemic has been deemed a national crisis due to the social and economic burden impacting the public. The Centers of Disease Control and Prevention (CDC) estimated an annual economic burden of $78.5 billion a year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement. The graph below shows the rise in opioid overdose deaths and the cause since 2000.
The Opioid Crisis Response Act of 2018 requires the commitment of Department of Health and Human Services (HHS) and the Department of Education and Labor with the help of the Food and Drug Administration (FDA), the National Institutes of Health (NIH), the Centers for Disease Control and Prevention (CDC), the Substance Abuse and Mental Health Services Administration (SAMHSA), Drug Enforcement Administration (DEA), and the Health Resources and Services Administration. The federal agencies recognize the need for involvement at the state and local level to address the current epidemic. The major provisions include the following:
- Research and Alternative Drugs: Increase the prospect of innovative research to find new, non-addictive painkillers and expedite the process through approved FDA channels. In addition, encourage the development of new pain management and addiction treatment.
- Changes in Prescription Practices: Package and require many prescription drugs, including opioids, with treatment durations in order to encourage responsible prescribing behavior to address over-prescribing and provide reports for whom and when opioids are medically appropriate.
- Comprehensive Opioid Recovery Centers: Grant programs for entities to establish or operate centers that provide the full continuum of treatment for individuals in areas most impacted by the opioid epidemic.
- Guidance for Recovery Housing: Issue and implement best practices for supportive housing models for individuals in recovery and provide incentives for adherence.
- Improve Access to Treatment: Remove the barriers to allow for Medication Assistant Treatment (MAT) to occur through telemedicine and allow nurse practitioners and physician assistant to prescribe specific MAT with limitations.
- Data Collection and Monitoring: Collect, monitor, and report to government agencies on relevant patient data points such as relapse, overdose and infection rates.
In 2010, the Affordable Care Act (ACA) was passed into law to provide uninsured American citizens with healthcare insurance offering the possibility of 31 million new medical insured patients. Since then, there has been a surge in private investment, specifically recovery and treatment centers, due to the increase in demand; reimbursement regulations providing ease of payment; and the government’s lack of support in building treatment and recovery centers. Though many argue that the support in the Opioid Crisis Response Act is not enough, it will change the dynamic by supporting the non-profit sector in this area. The act will provide resources for comprehensive treatment, create a best practice model, which currently does not exist. In addition, improving access through telemedicine and low-cost providers will lend to an increase in the outpatient recovery setting and lessen the demand for inpatient centers.
Recovery and treatment centers are not heavily regulated. They are recognized as non-medical rehabilitation facilities and can operate with general medical trained staff, which reduces operational labor costs. Recovery and treatment centers generate anywhere from $7,500 to $25,000 a month per patient for inpatient services and anywhere from $1,500 to $10,000 a month per patient for outpatient services. Statistics suggest that about 40 to 60 percent of recovering addicts eventually relapse, which may lead to a readmission. As government involvement occurs, and issues come to the forefront, there are a number of possible initiatives that could occur.
• Both government and commercial payors will push for outpatient services over inpatient services as telemedicine will be deemed an appropriate method for treatment.
• The government could set standards in centers requiring only licensed professionals.
• Payors could transition to a value-based reimbursement model setting incentives focused on positive outcomes.
• The institution of time-based readmission penalties, similar to acute care.
Interim market demands for recovery and treatment services will continue to rise due the sheer size of the current opioid epidemic; it will not go away overnight. If initiatives focused on research to finding alternative, non-addictive painkillers, and treatment duration for prescription drugs are successful, there will be significant reduction of individuals addicted to opioids over time. If the timeline for alternatives are expedited, demand for recovery and treatment services directly related to opioids could significantly start to fall in seven to ten years. It will take approximately three to five years for these alternatives to come to market, as opposed to the traditional timeline of an average of seven to nine years.
Based on public data, current EBITDA margins range from 14 to 20 percent for large recovery and treatment center conglomerates that have the ability to streamline the corporate function due to scale. The shift to outpatient services would result in a reduction of overall revenue but would provide for better margins as it is less costly to provide services in this setting. In contrast, if higher standards are set (which would require only licensed professional to operate in this healthcare setting) personnel cost could increase anywhere from 10 to 15 percent, lowering margins to single digits, if anything at all.
As data is collected, monitored, and analyzed, it can be utilized to determine the effectiveness of treatment plans to support standards for appropriate measures of success. Though it will come at a cost, it could hedge the potential risk associated with penalties on readmission, since this population has a high risk of returning to addiction.
As comprehensive recovery centers are implemented, and best practices are established, it will require a significant shift in the way resources are currently allocated. The current 30, 60 and 90-day programs will require interventions post discharge. Most of the post discharge services are currently supported by underfunded non-profit organizations and other community resources. These resources will need to be managed internally or within the treatment programs to ensure effective transition into society without relapse. This will impact the cost structure as these resources cannot be funded through grants and other public resources.