Hazelden CEO, Industry Pros Discuss Merger Details

Hazelden CEO, Industry Pros Discuss Merger Details

No money changed hands in the nonprofit mega-merger, which creates an entity with annual revenue of approximately $180 million.

Late Tuesday, the Center City-based Hazelden Foundation announced plans to merge with the Rancho Mirage, California-based Betty Ford Center, a move that will create the nation’s largest nonprofit provider of addiction treatment.

The combined organization, the Hazelden Betty Ford Foundation, will have annual revenue of approximately $180 million.

But unlike business mergers in the for-profit world, no money will change hands in the deal.

“No. There’s no money that is exchanged here at all,” said Mark Mishek, president and CEO of the Hazelden Foundation. He said that the assets of both organizations would simply be combined into a new entity. The deal is slated to close before the end of the year.

Mishek said that Hazelden’s current revenue is about $140 million, compared to roughly $40 million for the Betty Ford Center. Mishek will be CEO of the new organization, which will have its headquarters in Center City, approximately 45 miles northeast of downtown Minneapolis. Hazelden was founded in Center City in 1949.

Treatment industry professionals see the move as part of a growing trend of consolidation. At the outset of the year, the Council on Alcohol and Drugs Houston merged with Austin Recovery, a move that created the largest nonprofit residential treatment provider in Texas.

“The experience has been very positive. And as an outsider looking in, I think the same will be true for Hazelden and Betty Ford,” William M. Taylor, president and CEO of both Texas organizations, told Twin Cities Business. “From a business point of view, clearly one plus one equals three anytime we combine significant entities like that.”

Mishek said that merger discussions with the Betty Ford Center began in January. Hazelden confirmed in early June that it was pursuing a “possible alliance” with the Betty Ford Center.

Pending changes driven by the federal Affordable Care Act will mean that people who did not previously have insurance will now have coverage for outpatient addiction treatment.

“There’s going to be much more money in the system to help people get the care that they need,” Mishek said.

Beyond Minnesota, Hazelden currently operates facilities in New York, Illinois, Florida, and Oregon. The Betty Ford Center adds a presence in California. Hazelden already offers outpatient services in addition to residential inpatient treatment. The Betty Ford Center does not offer outpatient services, but Mishek said that the organization would immediately begin looking to add outpatient services to Los Angeles, San Diego, and other markets.

“Right now we’re in the middle of push to ‘medicalize’ treatment because that’s where the reimbursement comes from,” said Dan Cain, president of Minneapolis-based RS Eden, which provides treatment and related services. “There’s a much bigger involvement from the medical community than there has been in the past.”

“I think they are positioning themselves for the future,” Cain said of the Hazelden merger.

Even amid federal reforms, many will continue to have traditional insurance. Mishek said that 28 days of residential inpatient treatment at Hazelden currently costs about $29,000.

“It’s expensive and that’s why insurance coverage is so important,” Mishek said.

The combination with the Betty Ford Center expands Hazelden’s national reach.

“We’re going to have geographic reach that will be the best in the country,” Mishek said. “We’ll have good national coverage that we believe will appeal to large national [health] plans.”

According to the Star Tribune’s most recent ranking the state’s largest nonprofits (published in December), Hazelden ranked as the 31st-largest nonprofit in Minnesota. Combined revenue of $180 million for the new entity would rank the new organization as the 20th-largest nonprofit in the state.