CRC Health Group, now with 87 facilities, is continuing to grow.
CEO Barry Karlin explains some of the secrets of success of the behavioral health care company,
and talks about challenges for the treatment field.

CRC’s Karlin describes steps toward success
Alcoholism & Drug Abuse Weekly, September 19, 2005

      Five years ago, CRC Health Group had 20 facilities with headquarters in San Jose, California. It was the time of the Internet bubble. The place was Silicon Valley, the heart of the nation’s computer industry. And real estate in San Jose was very expensive. Since then, CRC, a provider of treatment for chemical dependency and related behavioral health problems, has grown rapidly, with 87 facilities nationwide at last count and, as of September 12, spacious new headquarters in Cupertino.

      On hand for the opening were CRC CEO Barry Karlin, Ph.D., California Alcohol and Drug Programs director Kathryn P. Jett, Cupertino Mayor Patrick Kwok, former director of the Office of National Drug Control Policy (and CRC board member) Barry McCaffrey, and local politicians.

      “We’re now in a better quality building, with a surrounding area that’s nicer, and we have 50 percent more space,” Karlin said. “And it really worked out in our favor, because when we relocated, our overall rent on a per-square-foot basis was lower than we were paying in San Jose.” In addition, the previous tenant — a big high-tech company that had downsized — left fancy furniture behind. He talked to ADAW about CRC’s recipe for success.

Moving into the future

      How does Karlin explain CRC’s success at a time when many treatment providers are struggling to meet the needs of patients? First, a willingness to change and adapt. “We can’t be locked into the past,” he says. “One example is in dealing with managed care.” This is a powerful force in the world of substance abuse treatment, and one that has a need to reduce the costs of treatment, says Karlin. “So you need to work with them in a way that is mutually beneficial. We established a clinical process many years ago that is based on working closely with managed care.”

      To do this, CRC developed a variable length of stay, depending on the needs of the individual patient. This suits managed care perfectly. “Managed care thinks that there’s no reason for each patient to get exactly the same number of days,” he says. “That’s why the 28-day Minnesota model doesn’t work any more.” And Karlin agrees that clinically, it’s better to have a length of stay that is based on individual need, as well.

      Karlin admits that it was easy for him to start fresh. “When I first got interested in substance abuse treatment, I wasn’t attached to any special operating model,” he says. “But the model we developed gave us the flexibility and the ammunition to do a varying length of stay.”

Business model

      Finding patients is another key to CRC’s growth. “At the end of the day, you need to get patients into treatment,” says Karlin. “If you don’t have patients, you don’t have revenue, and you can’t survive.”

      He believes that the business model must include high quality treatment, or patients won’t keep coming, no matter how much marketing is done. “You have to always recognize that your treatment program is a business, and you have to be vigilant about spending money, investing in the physical plant, in training of counselors, in teaching people how to operate the facilities,” he told ADAW.

"You have to recognize that each facility has its own nuances.
The last thing we want to do is mess with the way they’ve been doing things."
-- Barry Karlin
-- CEO, CRC Health Group

      While CRC has been acquiring facilities across the country, these facilities have been allowed to keep their identities, says Karlin. “You shouldn’t try to McDonaldize,” he says. “You have to recognize that each facility has its own nuances. The last thing we want to do is mess with the way they’ve been doing things.” What does CRC buy, then, when it buys a program? “A referral base and a set of clinical professionals, to begin with,” says Karlin.

Target demographic

      CRC’s “target” customer is actually a cross-section of the treatment population, says Karlin, noting that the programs should have something for everyone. “No matter who you are and where you are in the life cycle of addiction, whether you need detox or aftercare, whether you are dually diagnosed or have related diseases, you should be able to come to us,” says Karlin. “It’s one-stop shopping.” The overall identity of CRC is tied to the mission of the company: providing comprehensive treatment for behavioral health care problems.

      But despite these successes, Karlin recognizes that the monies going to substance abuse treatment are inadequate. “The block grant should be tripled,” he says. “You could do that by merely shifting a small portion of what’s spent on supply reduction, and put it towards treatment.” He cites cocaine interdiction efforts in Colombia, as well as law enforcement raids on methamphetamine labs in the United States, as examples. “You’ll never stop the supply, no matter what you do,” he says. “There will always be a supply. But the economics of treatment are overwhelming: studies show it pays off. So there needs to be a shift in a substantial number of dollars toward treatment.”

      Another problem may lie in the size of treatment centers, which Karlin says lose out on quality if they get too big. “The reimbursement offered by government tends to be on a per-patient, per-day basis,” he says. “It’s well below what private insurance would pay. Because of that, it’s not economical to have small facilities. But with a large number of beds, there’s a limit to what you can do in terms of quality. It’s a compromise.”

      The key is to get more funds in the block grant, but that requires support from the public, according to Karlin. Before that can happen, great strides must be made in education and destigmatization, he says. “The problem is that society as a whole doesn’t accept that addiction is a chronic disease.”

      For more information on CRC Health Group, go to •