Over the past several years, the treatment landscape for substance use disorder (SUD) has undergone significant changes. Outpatient programs have surged in popularity as payers and investors gravitate toward these more affordable and scalable options. At the same time, the traditional residential inpatient model, long considered the gold standard for many cases, faces growing challenges. Though more expensive and less accessible, residential care remains a critical piece of the continuum of care in substance use disorder treatment—especially for patients with more complex needs.
This article explores the forces shaping SUD treatment today, examining why outpatient programs are booming, the continued necessity of residential care, and how an integrated continuum of care in substance use disorder treatment offers the best path forward for patients and providers alike.
The Rise of Outpatient Treatment: Accessibility and Affordability Driving Demand
Outpatient treatment programs have grown rapidly in recent years, driven largely by their cost-effectiveness and accessibility. The National Center for Drug Abuse Statistics reports that the cheapest inpatient rehabilitation program costs about $6,000 per month, whereas a three-month outpatient rehabilitation program averages $5,000 total. This stark difference in price can be a decisive factor for patients, payers, and investors.
For patients, outpatient programs allow them to continue living at home, maintaining jobs, family responsibilities, and social connections while receiving treatment. This “real-world” engagement is often key to sustaining recovery. For payers, outpatient care significantly reduces costs, making it the preferred option for insurance providers and government programs.
Investors are also drawn to outpatient services for their scalability and growth potential. Drew Rothermel, CEO of Defining Wellness Centers, explains: “You rent some office space in a strip mall and you can open a new facility.” This low overhead and ease of expansion make outpatient programs highly attractive investments. Rothermel notes that investor interest has driven valuations for outpatient-only companies to “unconscionable levels,” signaling strong confidence in the model.
The Continued Importance of Residential Treatment in the Care Continuum
Despite outpatient care’s rapid rise, many experts argue that residential treatment is still essential and cannot be fully replaced.
Tom Greer, partner at Fulcrum Equity Partners, emphasizes the value of investing in providers that offer a full continuum of care in substance use disorder treatment, including residential options. His firm invested in Defining Wellness Centers precisely because it combines medical detox, inpatient rehab, partial hospitalization, and outpatient services under one umbrella.
“Residential is absolutely still needed,” Greer says. “But outpatient is a much more important part and a more focused area than ever before.”
Residential treatment offers intensive, structured environments that provide 24/7 medical supervision and support—critical for patients with acute symptoms or those in early detox. It also removes patients from environments that may trigger relapse, giving them a safe space to focus fully on recovery.
Kate Appleman, senior director of clinical practice at Caron Treatment Centers, notes a common misconception: many view residential care only as a last resort after other treatments fail. “We don’t have to wait until symptoms become severe to consider residential treatment,” Appleman says. “The truth is, the continuum of care in substance use disorder treatment at different levels is really what is needed.”
Addressing the “Revolving Door” of Treatment and Patient Retention
One persistent challenge in SUD treatment is the “revolving door” phenomenon—where patients cycle repeatedly through treatment programs without long-term recovery success. This not only raises costs for payers but also indicates gaps in ongoing support.
VNS Health, a nonprofit home and community health care provider based in New York City, launched a novel program in June 2023 to address this problem. Their approach involves care managers engaging with patients during residential stays and following them closely after discharge into outpatient settings.
Jessica Fear, senior VP of behavioral health at VNS Health, explains, “We knock down every barrier to patients staying stable in care.” This includes consistent contact for six to nine months post-discharge and follow-up check-ins after patients “graduate” from formal treatment.
The program helps patients build a supportive network and access community resources—“tools in their toolkit”—to resist relapse and maintain sobriety outside residential settings. This scaffolding is vital because, without ongoing community support, many patients fall back into substance use.
By emphasizing the importance of a strong continuum of care in substance use disorder treatment, programs like VNS Health’s help reduce relapse rates and improve long-term outcomes.
Limitations and Challenges of Outpatient-Only Models
Though outpatient programs offer numerous advantages, a sole focus on outpatient care carries risks.
Rothermel points out that outpatient providers often depend heavily on referrals from residential programs for patients who require detox or intensive inpatient care. “If you’re outpatient only, over 50% of patients you receive referrals for actually need residential treatment,” he says. When outpatient centers don’t offer residential care, they must refer these patients out—meaning they lose the opportunity to provide full-spectrum treatment and risk patients falling through the cracks.
Additionally, payer policies can limit access to residential treatment. For instance, Medicare does not cover residential SUD treatment, which restricts options for older adults relying on this insurance. Consequently, outpatient care is the only covered option for many patients, even when residential might be clinically indicated.
This highlights why a comprehensive continuum of care in substance use disorder treatment remains necessary, ensuring patients can access the right level of care at the right time.
The Investor and Payer Perspective: Balancing Cost, Access, and Outcomes
Payers favor outpatient programs primarily due to their lower costs, but also because they expand access and can be scaled quickly. Investors are similarly attracted to the outpatient model’s potential for rapid expansion with minimal infrastructure costs.
However, many agree that an integrated continuum of care in substance use disorder treatment is optimal for patient outcomes and sustainable growth. Providers offering both residential and outpatient services can retain patients longer and provide more tailored care depending on acuity and individual needs.
Greer stresses this balanced approach: “Outpatient is growing fast, but residential treatment still plays a vital role. It’s not a question of one or the other—it’s about having a full continuum of care in substance use disorder treatment.”
Looking Ahead: Integrated Care as the Future of SUD Treatment
The SUD treatment industry is at a crossroads. Outpatient programs are booming due to cost, convenience, and investor interest, yet residential care remains irreplaceable for many patients.
Providers that offer a seamless continuum of care in substance use disorder treatment—from medical detox and inpatient rehab to outpatient and aftercare—are best positioned to meet diverse patient needs and maximize recovery outcomes. Models like Defining Wellness Centers and VNS Health’s care management program demonstrate how integration and innovation can bridge gaps in care and reduce the cycle of repeated treatment episodes.
As the treatment landscape continues to evolve, maintaining access to all levels of care will be critical. Only by blending outpatient accessibility with residential intensity can the system truly support lasting recovery and transform lives.
