One of the unfortunate things that occurs in life is when an individual becomes addicted to drugs or alcohol and requires treatment for substance abuse. As such, one of the key strengths for a drug rehabilitation facility is that these services are in demand on an ongoing basis. Even during times of economic recession, drug rehab centers typically see a uptick in their revenues given that economic recessions do cause people to have substance abuse issues as shown by a number of different studies.
The startup costs for a new drug rehab center are considered to be moderate and typically range anywhere from $200,000 to about $1 million depending on whether or not the treatment facility is going to be an inpatient facility, outpatient facility, or mixture of both. One of the other strengths to a drug rehab center is that there is a very high educational requirement for the practitioners that will render services to people that are in need of help. Generally, a medical doctor needs to be on staff in order to assist people with a detoxification process as well as through appropriate counseling to help them with their substance abuse issues.
The barriers to entry are also very high given the substantial amount of licensure requirements by states that allow individuals to own and operate drug rehabilitation centers. The revenue centers generated from services come from patient payments, as well as through private insurance. Typical stay at an inpatient facility for someone has a substance abuse issue runs anywhere from $15,000-$50,000 depending on the type of care being offered.
As it relates to weaknesses, liabilities associated with treating people that have substance abuse issues is very high. Also, the operating expenses that are associated with these types of businesses are also very high given that the personnel on staff includes a medical doctor, psychologists, nurses, and other people that can properly care for those that have substance abuse issues. In any given market, there’s usually a moderate amount of competition among drug rehabilitation centers. As the number of people with substance abuse issues in the United States increasing – especially with the explosion of the opiate crisis – competition is expected to remain moderate to moderately high. However, at the time of this writing, there is currently much more demand than supply within the market.
As it relates to opportunities, many drug rehabilitation centers will seek to open additional locations outside of their current target market. This is really one of the key ways in which these businesses are able to expand the revenue streams. Additionally, mental health professionals and allied health professionals can be hired in order to boost the billings of the business on a month to month basis. Outside of these methodologies, there’s really no other way that a drug rehab center will increase the revenues outside of the establishment of new locations or hiring of additional medical personnel that have a specific training for dealing with people that have substance abuse issues.
As it relates to threats, the primary challenge faced by the drug rehabilitation centers is that changes in private insurance reimbursement can cause a shift in the profit and loss statement. However, with the continually increasing demand for quality substance abuse issues – this is considered to be a moderate threat. Any business that is involved with healthcare has to face this challenge on a yearly basis. Additionally, there is some issue with medical malpractice liability as a relates to rendering the services to the general public. However, these businesses are immune from negative changes in the economy given that drug use is prevalent within the United States. As such, there is expected to be very little change in the way that drug rehabilitation centers operate for at least 1 to 2 decades.