Hazelden and Betty Ford Agreement in Principle to Partner  E-mail
Addiction Treatment Industry Newswire

06/06/2013 –ATIN – In an indication of the huge uncertainties facing addiction treatment drug rehab alcohol rehab facilities as health care costs soar and ObamaCare looms, two of the nation’s most iconic centers have reached an agreement in principal on a partnership the details of which have likely yet to be fully worked out. The move by Betty Ford and Hazelden to begin discussions on what appears to be a possibly wide ranging partnership is a clear indication that going forward scale will be a major survival factor in the historically highly fragmented treatment industry – even the biggest players account for only a few percentage points of industry assets currently - and the deal is likely to be a huge push for consolidation among non-profits, many of whom have historically been intransigent about giving up their independence and who account for 60 percent of the addiction treatment industry.

Non Profit Consolidators

Gateway Foundation of Chicago has in the past carefully studied making a major consolidation play – without doing any deals- and right now the top recent acquirer of non-profits has likely been Rosecrance CEO Phil Eaton, who has managed to get a number of deals done in recent years. The legendary Psych Solutions founder Joey Jacobs’ new publicly traded for-profit Acadia Healthcare consolidation vehicle recently acquired a non-profit and Jacobs has publicly expressed interest in buying more non-profits, which for a for-profit can sometimes require jumping through quite a few hoops but is by no means all that difficult a type deal to get done – especially if the target is struggling or marginal financially. Las Vegas-based Westcare has for years pursued a consolidation strategy where assets are not acquired but functionality is centralized in order to achieve similar economy-of-scale advantages as an asset acquisition “roll up,” Wall Street slang for a consolidation play. And Caron recently took over the struggling Hanley Center in South Florida.

Betty Ford Weakness

In cannot be ruled out that this deal may have been at least partly driven by the relative decline of Betty Ford in recent years, which had been forced to slash prices during the financial crisis after years of relentless competition from the Malibu 6-Bed Model chipped away at the Palm Springs-based non-profit’s previously preeminent position at the high end of the business, reached in the 1980s when celebrities like Michael Jackson and Elizabeth Taylor made the center world famous. Betty Ford has also recently been beset by vicious and damaging infighting between the founding Ford family and their protégé, Betty Ford CEO John Schwarzlose, which resulted in the former First Lady’s daughter Susan Ford Bales being forced off the board of the center her mother founded.

Prelude to a Merger?

Of course, the announced agreement in principal might result down the road in a full scale merger of the two institutions, in which case the Hazelden/Betty Ford deal would be on a par with other historically important transactions, such as Bain Capital’s $720M 2005 purchase of CRC Health, by far the nation’s largest addiction treatment provider, and last summer’s purchase by Hyatt founders the Pritzker family of Chicago of Foundations Recovery Network, although that transaction has yet to produce the anticipated follow-on deals.


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Ted Jackson


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