Healthy Finance

The cost of fighting substance abuse

Government programs may create additional financial risks for hospitals.

Story: Joy Stephenson-Laws

At least 37 states have laws on the books allowing involuntary detention and treatment of substance abusers who have not committed a crime. In some states, the legal bar for such detention is high, requiring that the person threaten to harm themselves or another person. In other instances, a police officer may detain a person if the officer has “reasonable cause” to believe the person is in need of involuntary treatment. The amount of time the person may be held also varies from a few days to up to 90 days. Supporters of these statutes argue they are a necessary response to the rise in the number of Americans dying from both street and prescription drugs.

At the same time, an increasing number of states now require some form of drug testing for public assistance recipients. At least 15 states have passed legislation requiring drug testing or screening for public assistance applicants or recipients, according to the National Conference of State Legislatures. At least another 20 proposed bills that are in some stage of the legislative process. Some of these apply to all applicants while others require such testing only if there is a reason to believe the applicant is engaging in illegal drug activity or has a substance abuse disorder. As would be expected with these types of laws, many are facing some sort of court challenge, either on federal or state level.

These laws all have in common a desire to save public funds and motivate those with substance abuse issues to go through some form of rehabilitation. Measuring how successful these programs are at achieving either or both of these objectives depends to a great degree on how they work, who is doing the measuring, and how “success” is defined.

Even if the politics of these programs are open for debate, the magnitude of the problem—and its impact on families, communities, and the health-care system—cannot be denied.

Recent estimates are at least 8 percent of the U.S. population suffered from substance abuse at one point or another in their lives. Looking at the population of the United States on some sort of public assistance—which is estimated at 20 percent and expanding—most studies show this group does not necessarily have substance use or abuse levels higher than the general population. However, there are others that project up to 20 percent of these recipients used an illegal substance in the previous year. These numbers are significant. Also significant is the impact of requiring even a small percentage of these individuals to participate in outpatient or inpatient treatment programs have on the health-care system.

About 14,500 specialized drug treatment facilities provide a variety of services to people with substance abuse disorders, according to the National Institutes of Health. Unfortunately, this capacity is not projected to be sufficient for the existing demand since, by some reports, there already aren’t enough treatment beds for those who want them. In fact, some states have waiting lists for treatment. Add to this group those compelled into treatment


The anticipated demand created by involuntary treatment has the potential to make most health-care providers’ precarious financial situations even worse if they are required by state authorities to provide services to these individuals.

Hospital providers need to carefully monitor and manage three key areas:


Typically, hospital reimbursement for these types of services is low and made only after a hospital expends huge resources to obtain monies from government and private payers. Most hospitals already operate on razor-thin margins of less than 3 percent, so increases in expenses not reimbursed could wreak havoc on a provider’s balance sheet. Furthermore, while there is variation across facility type, the average hospital bed occupancy rate is approximately 67 percent. This leaves little room for re-allocating inpatient beds to inpatient rehabilitation nor to dedicating additional space to outpatient care.


Given the uncertainty of the Medicaid program, which, according to the Washington Post, is the “the largest source of funding for behavioral health treatment, like addiction recovery and substance abuse prevention,” any changes to the mental health and substance abuse requirements could greatly impact providers in general, especially if they must provide substance abuse rehabilitation services to a growing population.


Estimates are by the year 2025, there will be extreme shortages of mental and substance abuse social workers; clinical and counseling psychologists; and psychiatrists. All these fields play a role in substance abuse rehabilitation and counseling. As a result, achieving appropriate staffing levels may create greater demand for these professions. Until that demand is readily met, salaries may increase disproportionately, creating additional drag on sustainability.

The programs to force people into rehabilitation do not necessarily mean financial “doom and gloom” for providers. A prudent provider can take steps to address the financial and operating challenges posed by the potential increase in demand for substance abuse programs. These include utilizing financial forecasting that appropriately accounts for costs associated with increasing inpatient and outpatient substance abuse rehab and counseling capacity.

Providers might consider negotiating reimbursement rates that result in more reasonable compensation for the medically necessary services required by this type of treatment. For example, they can negotiate payments to reduce the administrative burdens caused by nonsensical denials and dilatory payer tactics. These types of payments include a percentage of billed charges and per diem amounts. Additionally, any agreement to accept these patients should include an irrefutable presumption of medical necessity when they are involuntarily admitted. Without these safeguards, hospital providers increase the risks of rendering uncompensated services.


 Joy Stephenson-Laws is founding and managing partner of Stephenson, Acquisto, and Colman (, a leader in health-care reimbursement law. To date, the firm has recovered more than $1 billion in unreimbursed, denied, or disputed medical claims. In this role, she leads a diverse team of attorneys, doctors, nurses, technology professionals, and health-care provider operations specialists.

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Healthy Living

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