News

By Thomas R. Collins

The decision by Caron Treatment Centers to spend millions of dollars to buy two large houses near the ocean in Delray Beach is designed to expand the organization’s addiction-treatment offerings.
It could also be seen as a shrewd business decision.
The genesis of Caron’s venture into luxurious, beachside residences for clients undergoing treatment — called the “Ocean Drive” program — lies in the 1990s. That’s when changes to the insurance industry and the dawn of managed care “decimated treatment benefits,” said Andrew Rothermel, an executive vice president and the president of Florida operations for Caron, which has headquarters near Philadelphia but has treatment facilities in Boca Raton and elsewhere.
After that, nonprofit Caron ended its contracts with insurance companies, choosing instead to rely only on self-pay and gifts from donors for its operations, and to charge people on a sliding scale according to their income, Rothermel said recently.
That has put more pressure to find revenue other ways. And the treatment of rich clients is a way to do that, Rothermel said. It also will mean “more money in the bucket” for “charity care” for financially struggling addicts, he said.
“That provides more care to the people that need it,” Rothermel said.
Caron is seeking an exception to Delray Beach’s limit of three unrelated people who can live together in a single-family neighborhood. The clients, as many as 14 at a time in the two beachfront homes, would undergo treatment at Caron’s treatment center in Boca Raton.
The ocean-side venture is just another segment of the big business of addiction treatment in South Florida, particularly Delray Beach.
The treatment industry ranges from halfway houses in lower- and middle-income neighborhoods — Delray Beach is a nationally known halfway-house hotbed — to the big-gala and big-name philanthropy scene of nonprofits such as Caron.
Laura Lee Chapman, who runs nine halfway houses in Palm Beach County with the for-profit Stepping Stones LLC and is familiar with the recovery business, said, “It can be very big with making money.”
The finances can even work out more favorably for a nonprofit, like Caron, than a for-profit business, because of the ability to accept tax-deductible donations and grants, Chapman said. Perhaps not surprisingly, she is starting a nonprofit group.
“I would actually make more money with a nonprofit than I would with a [for-]profit,” she said. “You give yourself a salary and you get paid from the grant money.”
Caron’s Ocean Drive initiative — with clients paying $60,000 a month and expected to stay two or three months at a time — is big revenue-generator because “people are willing to pay for it,” Rothermel said.
It’s a new focus for Caron — affluent clients who are highly functioning in their career and their lives, but who also need an intensive clinical addiction program.
A Caron brochure promises “preeminent addiction treatment” that’s “individualized for the most privileged client,” in which “paddle boarding, kayaking, yoga and quiet walks or runs on the beach are all part of the healing process.”
Caron officials have said they’re not seeking the celebrity client and that program rules put a premium on anonymity.
The venture will give Caron access to a niche market.
“It’s a very narrow level of care, but there’s no one else doing it,” Rothermel said.
Adi Jaffe, an addiction psychologist in Los Angeles who runs the Web site  www.allaboutaddiction.com, said changes to medical insurance provisions — putting it on a par with physical care — might lead to the spread of even more treatment centers, including in South Florida.
Plus, health care reform will likely mean insurance to a “huge new pool of people looking for treatment,” he said.
The impact remains to be seen, he said.
“That really depends on what the treatment centers that currently exist do,” he said. “There are many treatment centers that are operating far below capacity right now.”
Whether treatment-related facilities continue to spread or not, it remains a big business, particularly at Caron, where this month’s $500- to $1,000-a-plate fundraising gala at Mar-a-Lago features honorary chairman Donald Trump, football great Joe Theismann and entertainment by comedian Richard Lewis.
At Caron Foundation of Florida, in the 2009-10 fiscal year — the latest for which information was available — and the national Richard J. Caron Foundation, salaries and compensation make up more than 40 percent of the total expenses, tax documents show.
That is  less than it was at the West Palm Beach-based Hanley Center in 2009-10, the year before Caron bought it. That year, Hanley’s salaries and compensation accounted for 55 percent of the expenses, records show.
Rothermel said he wishes Caron’s percentage were higher.
“I wish we could pay our staff better,” he said. “The more staff we have and the more highly credentialed staff we have, the better our treatment’s going to be and the better our long-term results are going to be.” He said it’s a staff-reliant business that delivers “an intensely personal product.”
Caron’s president and CEO, Douglas Tieman, made $522,000 a year in 2009-10. At least seven other officers are paid more than $200,000 a year at Caron, which has about 800 employees. Rothermel made $245,000 in fiscal year 2009-10, the tax documents show.
Rothermel said those salaries are comparable to other top officials in the industry. Before the acquisition by Caron, the top official with 254-employee Hanley made $335,000, the records show.
In the same year, the head of the nonprofit cultural group Society of the Four Arts, with 33 employees, made $314,000 a year, tax documents show.
“We try to be below the 50th percentile, based on a ton of different factors,” Rothermel said. “But at the same time, if we lose a senior person, it is very, very hard to replace that person.”
Caron’s charity care was about $10 million in the last year tax documents were available.  Rothermel said the goal is $16 million this fiscal year.
He said the Ocean Drive venture would generate $1 million to $2 million for new charity care.
Rothermel said Caron also provides boosts to the local economy, with $5.7 million in salaries to local staffers, $5.8 million spent with community vendors and 3,200 hotel nights booked in the last fiscal year, many by families visiting those in treatment.
Mary Renaud — president of the Beach Property Owners association, which represents the Delray Beach barrier island and is opposing Caron’s plans — said the financial details don’t matter to her.
“It doesn’t matter if they’re making a profit or a loss,” she said. “It’s that they’re running a business in a single-family neighborhood and that’s not allowed in Delray Beach.”
Bob Ganger — head of the Florida Coalition for Preservation, which is also challenging the proposal — said the business aspect of Caron is directly linked to the amount of disruption that might come to the neighborhood.  
It makes business sense to maximize income per renter and to stay fully occupied, likely meaning a rapidly revolving door of tenants.
“That’s basic Economics 101,” he said. And the result is that “your neighbors are whoever happens to be in the home at any given time.”