Collaboration with Private Equity Firms ... Walk Toward the Light.

‘The only time you let the fox guard the hen house is when the hens have very long fangs and razor sharp talons.”

Steven Dunn

Readers of past articles may have noticed a “slight” disinclination to recognize any positive contributions of private equity firms in the eating disorder industry. Investigation revealed that PE Firms infiltrated the largest residential treatment centers, ignored the academic and not-for-profit foundations, created a financial rift within the industry, and are dictating policymaking and legislative aspects of the eating disorder industry exclusively for their financial benefit and to the detriment of others.

The problems and issues within the eating disorder industry and particularly, with the cabal of residential treatment centers which comprise the Residential Eating Disorder Consortium (“Consortium”) are substantive and run deep. Prior articles disclosed the less than stellar capacity for transparency and integrity exhibited by the Consortium. But even at this juncture, solutions and the ability to collaborate within the eating disorder industry and with the private equity firms are still possible and can be implemented for the purpose of saving lives.

Saving lives. Saving precious lives. Sometimes in the hustle of private equity firms taking over residential treatment centers, of seeking the greatest amount of profits, of taking advantage of incredibly intelligent yet naïve doctors, of building an empire of treatment centers, the harsh reality of this insidious disease is forgotten. Parents … mothers, fathers, gripped by the greatest fear a parent can possibly face, parents who would readily give up their own life to save the life of their beloved child, parents who live in a state of constant desperation turn to those residential treatment centers for even the smallest glimmer of … hope. Parents relying, praying, that the  representations made on slick websites translate into real life progress and defeating the monster which is trying to claim the life of their child. They entrust the most precious thing in the world to these treatment centers. As such, there is imposed upon those treatment centers, and those who own them, the highest duty of transparency, integrity, and honesty.

The slightest prevarication, exaggeration or withholding of information should be considered nothing more than an unconscionable taking advantage of those parents … and should be met with the highest degree of draconian retribution. And yet, even still there are solutions. And these solutions must be explored.

A Four Step Blueprint for Collaboration

Step One: Disclosure and Transparency

Eating disorders, as a disease are terrifying in part because so much of it is unknown. It lives in the murky shadows into which it drags our loved ones. It isolates our loved ones and takes them away from the love, the support, the light that could save their life. If faced with the certainty of illumination, of better understanding, we are better equipped to fight this disease.

For the vast majority of people, the only time they would hear about or even have knowledge of the existence of private equity firms in the eating disorder industry is if they could locate a very obscure, limited press release announcing the acquisition of a residential treatment center (“RTC”) by that firm. The websites of the RTCs do not mention the PE firm which owns them, in whole or in part. We are unaware of the influx of capital, or the inevitable, future financial burden placed upon those RTCs by PE firms… burdens which may dictate treatment decisions and protocol.

We are entrusting the lives of our children to you. Again, and read it slowly so there is no mistaking the message … We Are Entrusting The Lives of Our Children To You.

We have a right to know everything. You have a duty to disclose everything.

Thus, the first step of collaboration involves complete disclosure. Each RTC owned by a PE Firm should first be required to disclose the identity of the PE Firm, that PE Firm’s percentage ownership and the manner in which it is involved in the operations of the RTC. Does the PE Firm hold positions on the board of directors? How much capital was raised and dedicated to the RTC? What are the repayment obligations?

PE Firms may ask the reasons they should disclose this information. The response is … money drives treatment decisions. Whether it is our insurance benefit providers stopping or continuing payment for treatment, or our ability to private pay or a treatment center’s ability to train and employ counselors, dieticians or doctors, money drives treatment. If large bridge loans come due, or revolving credit lines, or senior secured first lien loans or delayed draw term loans, each loan in the tens or hundreds of millions of dollars, if sufficient capital is not raised or does not exist, patients will have to be cut loose, treatment centers could be forced to close, hundreds if not thousands of RTC employees will lose their jobs, bankruptcy could result … and our children could pay the ultimate price.

Step Two: Organization

The implementation of an organized system to permit this transparency is relatively simple to accomplish. The Consortium has been in existence since December 2011. Of their 26 members, 18 are owned in whole or in part, by PE Firms.

Accordingly, those 18 members organize a PE Firm Collaboration Committee as a subcommittee under the auspices of the Consortium. The Consortium already lists the following committees: Research Committee, Ethics Committee, Standards Committee, Policy Committee.

A Collaboration Committee would be a logical extension of one of its self-proclaimed missions, that is: “Collaborates across programs to support access to residential care.”

Each PE Firm would name one person to act as a liaison and serve on the Collaboration Committee. Their identities would be disclosed on the Consortium’s website.

Every year, in conjunction with the iaedp national conference, or the AED Conference, representatives from the Collaboration Committee agree to appear to discuss the industry. They are amenable to questions from attendees.

This type of participation and transparency brings the PE firms out of the shadows where they currently exist, and brings them into the clear light of day. Parents who entrust their children’s lives to the RTCs are able to obtain all material information they need in order to make the best decision regarding the care and treatment for their loved ones.

  

Step Three: The Consortium’s Participation

Naturally, this type of participation and involvement depends upon the approval of the Consortium. The Consortium as a group, presumably would have to agree to this type of collaboration.

They then would have to not only approach their respective PE Firms but then convince them that a Collaboration Committee is a viable, productive asset. The PE Firms would need to be convinced that this type of collaboration would not only benefit the PE firms and RTCs, but the parents and their children as well, both short term and long term.

In a telephonic communication with Jillian Lampert, the President of the Consortium, the initial idea of a collaboration with PE firms was broached. The specifics set forth in this article were not discussed. But, the idea of a collaboration was addressed. In response, Ms. Lampert stated that she would “bring it up at the next board meeting.” Parents, doctors, counselors, persons who are suffering from this insidious disease await the Consortium’s response or counter-ideas to implement a system of true, open, honest communication and greater awareness and involvement.

With the type of transparency a Collaboration Committee could bring to the eating disorder industry, to parents, to their children, and with so little demanded in terms of participation, the reasons why this type of interaction should not be implemented and embraced are mystifying.

Step Four: Financial Participation

Many people believe the most stirring line of John F. Kennedy’s inaugural address was, "Ask not what your country can do for you, ask what you can do for your country." The inspiration for Kennedy's famous observation can be found in Luke 12:48: "For unto whomsoever much is given, of him shall be much required."

So too, should we demand much from those who possess much especially if there is a way to address inequities in the eating disorder industry. The industry has turned its back on those living near the poverty line. No Consortium member accepts Medicare or Medicaid for full time residential treatment. At daily costs exceeding $1,000 per day, private pay for the vast majority of citizens is unreachable. There is an ever evolving system of “separate but equal” occurring in the eating disorder industry today. If you can afford health insurance whose policies contains sufficient provisions  providing payment at RTCs, and you can afford the co-pay requirements in most policies, then you can receive treatment in an RTC. If you cannot and since RTCs do not accept Medicaid, you must languish receiving no treatment and therefore increase the likelihood of dying.

To alleviate this gross disparity afflicting the eating disorder industry, and as part of being a responsible member and participant in the eating disorder industry, PE Firms could be required to donate one percent (1%) of the acquisition amount they pay for RTCs into a tax-exempt trust or 501(c)(3) foundation. The purpose of this contribution would be to help pay for treatment for those critically ill people who cannot afford treatment. A certain percentage of the contribution could be assigned to expand research into the biological causes of this insidious disease. A certain percentage of the contribution could be assigned to pursue progressive legislation designed to expand the scope of mental health treatment to all persons, not just those privileged enough to be able to afford it.

By way of example, CCMP Capital Advisors is on record paying $550 million to acquire the Eating Recovery Center in September 2017. One percent (1%) of this acquisition price would be $5,500,000. One can only imagine the incredible good for the public trust that could be accomplished with a monetary contribution not only from CCMP, but the other PE firms who have invested in the 18 members of the Consortium. Millions of dollars going to research, payment for treatment for the poor and disenfranchised, millions of dollars providing hope. One percent.

Conclusions

We are entrusting the lives of our children to RTCs. Again and again, read it slowly so there is no mistaking the message … We Are Entrusting The Lives of Our Children To You.

Collaboration of the kind set forth in this article results in transparency, honesty and integrity for the eating disorder industry. It results in improved public relations. It has the potential to bring together all parties, PE Firms, RTCs, doctors, counselors, parents and patients as one strong ally. It increases the likelihood of obtaining funding, grants, donations, gifts and bequests not only from federal and state parties.

Collaboration of the kind set forth in this article is also necessary since there is no federal legislation or regulations in place overseeing the eating disorder industry. State’s laws are inconsistent or non-existent. Collaboration of this type would result in greater assurance that corporate practice of medicine doctrines are being respected and complied with. Collaboration would also insure that consumer rights laws are being complied with so that the more outrageous promises and representations being made today become a tactic of by-gone days. Further, collaboration could result in greater consistency with insurance providers so that benefits become more uniform and predictable.

Are there any compelling reasons not to seek collaboration such as that presented herein? A need to have 100% instead of 99%? What substantive reasons exist for allowing the PE Firms to remain in the shadows, where only they and this insidious demon, eating disorders reside side by side?

We entrust the lives of our children to you.

And for those of us parents whose beloved children were ripped from this life as sacrifices at the altar of the wealth accumulated by the PE Firms and their RTCs, we have the absolute right to demand answers for the questions set forth in this article.

Collaboration … For the reason that we entrust the lives of our children to you.