Key Takeaways
- In-network residential SUD providers now command acquisition multiples of five to ten times EBITDA, according to a 2025 Scope Research analysis, while out-of-network-dependent operators trade at three to eight times, reflecting reimbursement volatility and revenue uncertainty.
- An RTI International study cited in the federal government’s 2024 mental health parity rulemaking found that out-of-network utilization is 3.5 times higher for behavioral health visits than for medical or surgical visits, a disparity that payers have spent years attempting to close.
- Recovery Centers of America’s September 2025 agreements with Optum, combined with existing Anthem/BCBS, Aetna, and Cigna contracts, now cover an estimated 85 to 90 percent of all commercially insured lives in New Jersey, South Carolina, and Indiana.
- In-network status is a prerequisite for value-based contracting in addiction treatment, which requires claims data, quality benchmarking, and payer relationships that out-of-network models cannot generate.
- The addiction treatment industry has not agreed on what outcomes to measure or how to measure them consistently, a gap that could delay value-based contracting by years even as in-network adoption accelerates.
- The in-network migration will likely accelerate consolidation: smaller, single-site operators without the volume, data infrastructure, and payer negotiating leverage of multi-site platforms face the steepest transition costs, and many may not survive it.
- Broader access at lower in-network rates creates a clinical tension: if reimbursement does not cover the cost of the care model that produced the outcomes payers want to buy, providers will face pressure to shorten lengths of stay, reduce staffing, or cut programming.
Recovery Centers of America was, by its CEO’s account, an outlier from the start. “RCA from the beginning started as an in-network provider,” Brett Cohen said in an interview with Acuity Media Network. “It was one of the first companies that said this is the future of the industry.”
That future, Cohen believes, is now arriving for everyone else. The residential addiction treatment industry, long defined by out-of-network billing that allowed providers to set their own rates and collect directly from patients or their families, is in the middle of a migration toward in-network commercial contracts. The shift reflects converging pressures: payer consolidation, employer demand for lower behavioral health costs, tightening regulatory scrutiny of network adequacy, and a growing recognition among providers that the old model, however lucrative, cannot sustain an industry that wants institutional credibility in the broader healthcare system.
The numbers behind the migration tell a story about where the economics are heading. According to a 2025 M&A valuation analysis by Scope Research, residential SUD providers with in-network contracts now command higher acquisition multiples (ranging from five to ten times EBITDA for established regional chains), while out-of-network-dependent operators trade at the lower end of the spectrum (between three and eight times), weighed down by reimbursement volatility and revenue uncertainty. The market has already priced in the transition. For buyers and investors in behavioral health, in-network status has become a proxy for stability.
Why Commercial Payers Are Pushing Residential SUD Providers In-Network
For providers, going in-network means accepting lower reimbursement rates in exchange for patient volume and payer relationships. Cohen was candid about the tradeoff. “It does put stress on providers because historically in-network rates are lower than out-of-network rates,” he said. “You have to control your costs more and be more judicious about where you spend every dollar.”
The differential between in-network and out-of-network reimbursement in behavioral health has been well documented. An RTI International study cited in the federal government’s 2024 mental health parity rulemaking found that out-of-network utilization was 3.5 times higher for behavioral health clinician visits than for medical or surgical visits, a disparity that has persisted for years and that researchers concluded was not fully attributable to provider shortages. A 2019 Milliman report, also cited in the rulemaking, found the gap between in-network and out-of-network behavioral health utilization had actually widened over time, suggesting that behavioral health reimbursement rates were not keeping pace with what providers needed to participate in networks.
For commercial payers, the calculus runs in the opposite direction. Out-of-network billing in residential SUD care generates unpredictable costs, complicates utilization management, and undermines the network-based contracting frameworks that health plans rely on to control spending. Payers have increasingly pushed to bring high-cost behavioral health services into their networks, both to gain pricing leverage and to meet mounting regulatory demands around network adequacy. The Mental Health Parity and Addiction Equity Act, originally passed in 2008 and updated by the Biden administration with a strengthened 2024 final rule, was designed to ensure that coverage for mental health and substance use disorders matched coverage for medical and surgical benefits (including in areas like network design and authorization standards). Though the Trump administration announced in May 2025 that it would pause enforcement of the 2024 rule’s newest provisions, the underlying statutory obligations remain in effect, and the regulatory trajectory has pushed payers toward broader in-network behavioral health coverage regardless of the enforcement timeline. The broader questions around how telehealth flexibilities interact with that parity framework add another layer of complexity for SUD providers navigating multi-state contracts.
RCA’s September 2025 announcement that three of its locations had gone in-network with Optum, one of the nation’s largest health insurers, illustrated the scale of the shift. The agreements cover RCA’s Indianapolis, Greenville, and Lighthouse (New Jersey) facilities across the full spectrum of SUD care, from detox through intensive outpatient. According to the company, the Optum partnership (combined with existing contracts with Anthem/Blue Cross Blue Shield, Aetna, and Cigna) means RCA’s locations in New Jersey, South Carolina, and Indiana now cover an estimated 85 to 90 percent of all commercially insured lives in those states.
In-Network SUD Contracting as a Path to Value-Based Care
Cohen argued that in-network status unlocks a second, more consequential shift: the possibility of value-based contracting in addiction treatment. “It allows for an opportunity for the payer to partner differently with a provider,” he said. “You can start thinking differently about what that looks like and really differentiate based on quality. Think about value-based contracting or different payer structures that you can’t achieve in an out-of-network model.” For context on how that shift is unfolding across mental health and SUD more broadly, Acuity’s coverage of the value-based care reality check outlines the operational preconditions providers need before taking on risk-based contracts.
The logic follows a path familiar from other healthcare sectors. In-network relationships generate claims data. Claims data enables quality benchmarking. Quality benchmarking enables payment models that reward outcomes rather than volume. Orthopedics, cardiology, and primary care have all traveled this arc, though none without significant friction. Cohen invoked the parallel directly: “Other parts of healthcare started the same way. There are other segments that when they started were much more out-of-network focused. Over time they all evolve, and addiction will get there as well.”
But addiction treatment faces a complication that most medical specialties do not. The industry has not yet agreed on what outcomes to measure, let alone how to measure them consistently. Cohen himself acknowledged the challenge: “There’s limited consensus on outcomes,” he said. Value-based contracting in SUD requires providers and payers to solve the measurement question first, a prerequisite that could delay the transition by years. One industry executive, speaking at Becker’s 2025 Behavioral Health Summit, captured the tension: outcome data presented to payers has historically failed to resonate in rate negotiations, and the value-based contracts that do exist tend to originate from payer-identified needs rather than provider-driven quality metrics. The long road to value in behavioral health has always run through this measurement gap, and the SUD sector is no exception.
SUD Provider Consolidation: Which Operators Cannot Survive the In-Network Shift
The in-network migration carries a quiet corollary: providers who built their businesses around out-of-network billing may not survive the transition. Out-of-network rates in residential SUD have historically been multiples of in-network rates, and many smaller operators have cost structures that depend on that margin. Moving in-network without fundamentally rethinking staffing ratios, length-of-stay protocols, and overhead requires a financial discipline that not every provider can execute.
The M&A data reflects this pressure. In the first half of 2025, there were eighteen deals in the SUD space, according to M&A advisory firm Mertz Taggart. Kevin Taggart, the firm’s managing partner, noted that “some very notable, big-name buyers have been choosing to remain on the sidelines,” though he added that a few were beginning to re-engage. The most notable failure in recent years (the collapse of private equity-backed Delphi Behavioral Health Group, which closed all but three of its centers and filed for Chapter 11 bankruptcy) offered a cautionary example of what happens when operational economics and payer dynamics fall out of alignment. The KPIs that buyers now scrutinize in behavioral health acquisitions include payer mix and in-network contract coverage as front-line indicators of revenue sustainability.
Cohen framed the transition in evolutionary terms, but evolution has casualties. The providers most likely to struggle are smaller, single-site operators that lack the volume, data infrastructure, and payer negotiating leverage of multi-site platforms. SAMHSA’s 2024 survey counted more than 21,000 substance use and mental health treatment facilities nationwide, a landscape that remains heavily fragmented. The in-network shift could accelerate consolidation in a sector already consolidating rapidly, as smaller providers either secure contracts at rates that squeeze their margins or get acquired by larger platforms that can absorb the transition costs.
In-Network Addiction Treatment and the Access Question
The strongest argument for in-network addiction treatment centers on access. Out-of-network care creates a two-tiered system in which commercially insured patients with out-of-network benefits can access residential treatment, while those whose plans require in-network providers face limited options. The 2024 National Survey on Drug Use and Health found that 48.4 million Americans aged twelve or older had a substance use disorder in the past year, but only about one in five (roughly 10.2 million) received any substance use treatment. Expanding in-network availability, as RCA has done with Optum, theoretically broadens the patient pool and reduces the financial barriers that keep people from entering care.
But broader access at lower rates also raises questions about what care looks like on the other side of the transition. If in-network reimbursement does not cover the cost of the clinical model that produced the outcomes payers are buying, providers will face pressure to shorten lengths of stay, reduce staffing, or cut programming. Commercial payers already typically reimburse behavioral health services at 120 to 200 percent of Medicare benchmarks, according to industry analyses (a premium that sounds generous until measured against the actual cost of operating residential treatment facilities with round-the-clock clinical staff). Medicaid, the single largest payer for behavioral health services, reimburses at roughly 70 to 80 percent of Medicare rates on average, with wide state-by-state variation, and proposed changes to Medicaid eligibility verification cycles add further uncertainty for providers whose patient census includes Medicaid-covered individuals.
The industry’s challenge, as it navigates this shift, requires balancing two imperatives simultaneously: making care accessible enough to reach the millions who need it while maintaining the clinical quality that justifies the investment. That tension will define the next chapter of residential SUD treatment, and the providers that resolve it will likely be the ones still standing when the transition is complete.
What Behavioral Health Providers Should Do Before October 2026
Several practical considerations emerge from the implementation timeline. First, the October 2026 start date for immigrant eligibility changes precedes the December 2026 effective date for work requirements and six-month redeterminations. Providers should anticipate that coverage disruptions may begin affecting some patients in the fall of 2026, with broader impacts rolling out through early 2027. This timeline compression mirrors the pattern federal auditors have identified in other high-growth Medicaid behavioral health categories, where policy changes outpace providers’ ability to adapt documentation and administrative systems.
Second, the state’s approach to work requirement verification will significantly influence how many members lose coverage. California’s decision to use income-based verification rather than hour tracking could reduce coverage losses, but the operational details matter enormously. Providers should monitor DHCS guidance as these systems are developed.
Third, county eligibility offices will face dramatically increased workload as six-month redeterminations take effect. Processing delays and backlogs could result in coverage gaps even for members who remain eligible. Providers may need to work more closely with county offices and Coverage Ambassadors to help patients maintain continuous coverage.
Finally, the exemption verification process for behavioral health populations will require attention. Ensuring that clients with qualifying conditions are properly documented as medically frail could prevent unnecessary coverage losses. The broader policy question of how behavioral health providers position themselves as Medicaid restructuring accelerates connects directly to value-based care frameworks that tie reimbursement to outcomes rather than volume: organizations that can demonstrate measurable clinical results are better positioned to weather reimbursement contractions than those that cannot. Recent investment activity in value-based behavioral health infrastructure suggests that some of the capital entering the sector is explicitly betting on that positioning.
DHCS hosted an All-Comer Webinar on February 5 to review the implementation plan and answer questions. The full implementation plan is available on the DHCS website. As federal guidance continues to emerge and state systems are developed, providers should expect additional details throughout 2026.
Frequently Asked Questions:
What does it mean for a residential SUD provider to go in-network?
Going in-network means a residential addiction treatment provider has contracted directly with a commercial health insurer to provide services at a pre-negotiated reimbursement rate. In exchange for accepting lower rates than out-of-network providers typically charge, in-network providers gain access to the insurer’s covered members, simplified claims processing, and greater patient volume. For patients, in-network care typically means lower out-of-pocket costs and fewer administrative barriers to accessing treatment.
Why do in-network SUD providers command higher acquisition multiples?
In-network status signals revenue stability to acquirers and investors. Out-of-network-dependent providers face reimbursement volatility, uncertain collections, and growing regulatory and payer pressure to contract with insurers. According to a 2025 Scope Research analysis, in-network residential SUD providers trade at five to ten times EBITDA, while out-of-network operators trade at three to eight times. The gap reflects the market’s expectation that the in-network model is more durable. For a broader view of what buyers look for in behavioral health acquisitions, payer mix and in-network contract coverage are among the first metrics examined.
What is the Mental Health Parity and Addiction Equity Act, and how does it affect in-network SUD coverage?
The Mental Health Parity and Addiction Equity Act (MHPAEA), originally passed in 2008, requires that health insurance coverage for mental health and substance use disorder treatment be no more restrictive than coverage for medical and surgical benefits. This applies to areas including network design, prior authorization requirements, and reimbursement standards. A strengthened 2024 final rule from the Biden administration expanded these requirements, though the Trump administration announced in May 2025 that it would pause enforcement of the newest provisions. The underlying statutory obligations remain in effect, and the regulatory pressure they create has contributed to payers expanding in-network behavioral health coverage regardless of the current enforcement posture.
What is value-based contracting in addiction treatment, and why does in-network status matter for it?
Value-based contracting ties reimbursement to patient outcomes rather than volume of services delivered. In addiction treatment, this could mean payment structures that reward reduced readmission rates, sustained sobriety, or lower total cost of care. In-network status is a prerequisite for these arrangements because it generates the claims data, quality benchmarking infrastructure, and payer relationship needed to negotiate outcome-linked contracts. Out-of-network providers, by definition, lack that data relationship with insurers. The transition is complicated by the fact that the SUD industry has not yet agreed on standardized outcome metrics, a gap that could delay value-based contracts even as in-network adoption accelerates. The operational realities of value-based care in SUD illustrate how much infrastructure providers need before taking on risk-based arrangements.
How will the in-network migration affect smaller SUD providers?
Smaller, single-site SUD operators face the steepest challenges in the in-network transition. Their limited patient volume reduces negotiating leverage with payers, making it harder to secure rates that cover operating costs. Their data infrastructure is typically less developed, which disadvantages them in utilization management and quality reporting. And their cost structures, often built around out-of-network margins, may not be sustainable at in-network reimbursement levels without significant operational restructuring. The likely outcome for many smaller operators is acquisition by larger platforms that can absorb transition costs or negotiate more favorable rates through scale. SAMHSA’s 2024 survey counted more than 21,000 substance use and mental health treatment facilities nationwide, and industry observers expect the in-network shift to accelerate consolidation in a sector already consolidating rapidly.
Does Medicaid cover residential SUD treatment in-network?
Medicaid is the single largest payer for behavioral health services in the country, covering substance use disorder treatment for eligible low-income individuals. However, Medicaid reimbursement rates for behavioral health average roughly 70 to 80 percent of Medicare rates nationally, with significant variation by state, and coverage terms for residential SUD care differ substantially across state Medicaid programs. The proposed shift to six-month Medicaid eligibility redetermination cycles under the One Big Beautiful Bill Act adds further uncertainty for SUD providers whose census includes Medicaid-covered patients, as coverage disruptions mid-treatment create both clinical and revenue challenges.
