Financial struggles in addiction treatment have led to an unprecedented turn of events at Retreat Behavioral Health, a multi-state addiction treatment provider that has closed its doors, leaving employees without pay and patients without critical care. Once a well-established provider of residential and outpatient treatment services in Connecticut, Pennsylvania, and Florida, the company quickly devolved into chaos, with the sudden closure of multiple facilities and an abrupt shutdown of operations. Since its founding in 2011, Retreat Behavioral Health is now a tragic case study in financial mismanagement, poor oversight, and the challenges of addiction treatment in the private equity world.
A Sudden and Tragic Week
Retreat Behavioral Health’s dramatic collapse began in earnest during the final week of June, but the signs of trouble had been mounting for some time. The chain of events was marked by a series of increasingly desperate measures and unfortunate developments that sealed the company’s fate.
The death of the company’s CEO and founder, Peter Schorr, on June 21, followed by the passing of Chief Administrative Officer Scott Korogodsky on June 23, left the organization in a state of complete disarray. These sudden losses were a devastating blow to an already struggling organization. Schorr and Korogodsky were pivotal figures in the company’s operations, and their absence left a power vacuum that no one was prepared to fill.
Amid this tragedy, Retreat’s operations were swiftly wound down. On June 27, employees received layoff notices stating that the company would “cease doing business” in its entirety. The termination notice backdated the closure to June 26, with the majority of employees, save for a few retained for regulatory purposes, being dismissed on June 21. But by that time, the company’s crisis had been building for weeks—if not longer.
The Financial Struggles Behind the Scenes
The closure of Retreat Behavioral Health did not happen overnight, and the company had been facing mounting financial difficulties for months, if not years. Multiple employees who spoke on condition of anonymity confirmed that the organization had been experiencing significant financial stress, and there were numerous indicators that trouble was brewing long before the tragic deaths of the two executives.
One of the earliest signs of distress was the company’s increasingly erratic handling of payroll. In early June, Retreat’s employees were notified that their June 7 paychecks would be delayed due to a “technical issue.” While company executives downplayed the situation, telling employees that there was “no reason for alarm,” the delay was a harbinger of worse things to come. As payday arrived, many employees were left without their much-needed wages. It was not until June 10 that the missing paychecks finally arrived, but this delay was merely a prelude to the bigger crisis.
The payroll issues were not an isolated incident. On June 20, another financial crisis erupted when a Florida court issued a clerk default against Retreat Behavioral Health in connection with a foreclosure lawsuit. The case involved a $17.2 million loan default related to the company’s Palm Springs, Florida, residential treatment center. A ruling was issued after the company failed to meet its legal obligations, and once again, the company’s financial troubles became public.
As financial pressures mounted, more contractors and services started pulling out of their agreements with Retreat. Essential supplies, such as bottled water and office supplies, became scarce. Lab testing services, which are crucial to patient care, stopped picking up samples. Employees, many of whom had already witnessed several financial red flags, were now seeing the direct impact of Retreat’s financial mismanagement on their daily operations.
Perhaps most concerning, however, was the revelation that Retreat Behavioral Health had been grappling with a significant legal battle in the form of a $26,000 nonpayment dispute with the digital learning platform Docebo NA. The company lost the dispute by default judgment, further highlighting the severe financial dysfunction at Retreat’s headquarters.
These ongoing issues underscore the broader trend of financial struggles in addiction treatment that many companies face. The lack of reliable funding, delayed reimbursements from insurance providers, and inconsistent support from contractors create a precarious environment where even well-established providers can quickly spiral into financial distress. Retreat Behavioral Health’s closure highlights how these struggles can lead to organizational breakdown, affecting both employees and patients.
Private Equity and the Role of Stonehenge Capital
Complicating the situation further was Retreat’s involvement with private equity firm Stonehenge Capital, which had acquired the company in recent years. Stonehenge, which had provided a $6 million loan to fund the opening of Retreat’s residential treatment center in Connecticut, had a vested interest in the company’s success. However, the terms of the acquisition deal remained largely undisclosed, and it is unclear how much involvement Stonehenge had in managing the day-to-day financial decisions at Retreat.
Employees at Retreat Behavioral Health indicated that they were kept largely in the dark about the company’s financial performance. Alexander Hoinsky, the CFO at Retreat, told local media that the company’s revenue had been declining for over a year, and that Schorr was the primary decision-maker when it came to handling finances. Hoinsky claimed that the company may have been able to recover if it had been able to collect payments from insurance companies, but the overall situation was dire. The CFO’s statement suggests a lack of proper financial oversight and a failure to address the deepening issues in a timely manner.
While private equity firms like Stonehenge Capital often bring in capital to expand operations and improve services, their focus on short-term profits can sometimes overshadow the long-term viability of the organizations they acquire. In Retreat’s case, the prioritization of financial gain over long-term sustainability appears to have played a central role in the company’s downfall. The financial instability, coupled with a lack of transparency and accountability, left Retreat vulnerable to its eventual collapse.
The role of private equity in the addiction treatment sector raises larger questions about how best to support providers who are grappling with financial struggles in addiction treatment. While investment in addiction recovery services is critical, there must be a balance between financial considerations and the long-term health of the organization and its patients.
The Impact on Employees and Patients
The fallout from Retreat Behavioral Health’s closure has been devastating for both employees and patients. Employees were left without their final paychecks, some of which had not been received as of June 28. With no clear answers about when they might be paid or what their next steps would be, many staff members have been left scrambling to find new employment, unsure of the company’s intentions toward their severance and benefits.
For the patients at Retreat’s residential and outpatient facilities, the impact was just as severe. Many of these individuals were in the midst of addiction treatment programs that were abruptly cut short. Employees were tasked with discharging patients as quickly as possible, often without adequate notice or resources to properly transition them to alternative care settings. For patients who had been receiving vital addiction treatment services, the sudden disruption was a cruel setback in their recovery journey.
This situation underscores the fragile nature of addiction treatment facilities, many of which operate on tight margins and depend on reliable, consistent funding to stay afloat. The financial struggles in addiction treatment that led to Retreat’s closure serve as a reminder of the vulnerability of addiction treatment services in an industry that is often underfunded and undervalued.
The Broader Issues in the Behavioral Health Sector
Retreat Behavioral Health’s sudden collapse is not an isolated incident. Financial distress is a widespread issue in the behavioral health industry, where many providers face the challenge of balancing care for vulnerable populations with the need for financial sustainability. The lack of parity in reimbursement rates from insurance providers, combined with administrative hurdles and delayed payments, has created an environment where behavioral health providers often operate with razor-thin margins. These financial pressures are exacerbated by the complexity of treating patients with addiction and co-occurring mental health disorders, who require intensive, long-term care.
The involvement of private equity firms in the sector adds another layer of complexity. While these firms often bring in capital to expand operations and improve services, their focus on profitability can sometimes overshadow the long-term viability of the organizations they acquire. In Retreat’s case, the push for financial gain—coupled with a lack of transparency and poor financial management—ultimately led to the company’s downfall.
Moving Forward: Lessons to Be Learned
The closure of Retreat Behavioral Health is a tragic and cautionary tale for the addiction treatment industry. As the sector continues to face financial struggles in addiction treatment, it is imperative that providers, investors, and regulators work together to create more sustainable models of care. The financial instability that plagued Retreat Behavioral Health highlights the need for greater transparency, more reliable funding streams, and a focus on long-term stability rather than short-term profits.
For employees and patients affected by the closure, the road ahead is uncertain. Many are left grappling with the emotional and financial fallout of an event they never saw coming. However, this closure may also serve as a wake-up call for the addiction treatment industry, one that emphasizes the importance of sound financial practices, ethical management, and, most importantly, the well-being of both employees and patients. As the industry evolves, it must prioritize not only financial health but also the health and recovery of the individuals it serves.
