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Paul Roman and Aaron Johnson are discovering that private rehab businesses often fail for reasons that run counter to conventional wisdom.

The University of Georgia sociologists monitor more than 400 private substance abuse treatment facilities coast to coast as part of an ongoing study funded by the National Institute on Alcohol Abuse and Alcoholism. Since Roman first began this research project more than a decade ago, scores of private rehab centers have failed. Now he and Johnson have identified the risks associated with those closings.

It seems logical that younger businesses would be more likely to fail than older, well-established ones. But the UGA study, which includes centers from one to 75 years old, found no increased liability of closing among upstarts.

Nor did another popular notion — that business managers are oblivious to trouble in the offing — hold true.

“Management literature implies that things fall apart without managers knowing about them, that these things come about suddenly and unexpectedly,” Roman said.

The study suggests just the opposite; center administrators usually see trouble brewing.

“We were surprised that the decline and fall were so visible to the manager. It’s a strong suggestion that you’d better look at how things are going and scrutinize what processes are under way,” Roman said.

Curiously, things like annual staff turnover, which ranged from zero to 150 percent in the study, did not prove to be predictors of business failure. However, the study shows that economizing measures — staff layoffs and position vacancies — can backfire as the ratio of patients to staff rises.

“When a center closes it means they’re not getting enough referrals,” said Roman, who has more than 150 journal articles and nearly two-dozen books on alcohol-related topics to his credit.

“We felt this reflected a point where service must get lousy and nobody wants it anymore,” he said. “No center closes when it’s got a lot of referrals coming in the door.”

Serving a larger proportion of Medicaid patients can be a risky practice for private centers, but reliance on third party payers — such as HMOs and PPOs — was not associated with risk.

“The findings confirm our suspicions that Medicaid payments in some cases are inadequate to support privately funded centers,” Roman said. “Our data definitely show that the more a treatment program depends on Medicaid, the greater risk it has of going under.”

The reason? Roman said he thinks some places that depend on Medicaid reduce staff costs as low as possible, a strategy that “can slowly undermine the quality of service until a center can’t function any longer.

“Private centers don’t have any fall back,” he said, “no cushion at all.”

— J.B.P.

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