Nonprofit drug treatment center for low-income Texas teens shutters amid opioid crisis

Texans seeking help for substance use can call the Substance Abuse and Mental Health Services Administration’s free help line at 800-662-4357. They can also access services in their region through the Texas Health and Human Services website.

After decades of treating low-income Texans fighting substance addiction, Phoenix House Texas is closing down all six of its outpatient clinics and its last residential treatment center for teens this week because they can no longer count on the state to help fund them, the nonprofit group’s director said Tuesday.

The 28-year-old organization relies heavily on federal block grants administered through the state to serve its mostly low-income adolescent patient population. And the nonprofit is the latest casualty in an escalating funding crisis for Texas residential treatment centers that comes as the state struggles with startling increases in overdose deaths, particularly among young people.

“We feel like this couldn’t be worse timing,” said Drew Dutton, CEO of Phoenix House Texas, which only treats adolescents. “This is when we feel like Texas needs us the absolute most, and we're having to close our doors and turn away patients.”

By Friday, the group’s residential treatment center Phoenix House Dallas will have closed its doors to its 30 current residents. It was the last residential treatment option for unfunded teens in North Texas, and comes on the heels of the group’s Austin residential center closure last month, which was shut down in an effort to keep the network afloat.

That Phoenix House center was also the only residential treatment for drug-addicted unfunded youth in Central Texas, Dutton said.

The organization will also shut down its outpatient drug treatment services for adolescents at its other six locations in Austin, Dallas, Houston, Round Rock and San Antonio, as well as its virtual services – which serve hundreds of patients a year — and shift the focus entirely to preventive services and public awareness, Dutton said.

The majority of Phoenix House patients are uninsured and can’t afford most private pay rates, which is why the centers rely so much on federal dollars. The block grant amounts tend to fluctuate over the years, and the state has occasionally raised rates in other sectors such as outpatient services depending on the money available, HHSC officials told the Tribune.

The payments to residential centers have only risen by 5% in the last decade, Dutton said.

In an emailed statement, HHSC spokesperson Mike Parker said in an email the agency decides on rates for block grant qualified services based on available grant funding.

Parker said agency officials were not available for a phone interview on this story with the Tribune.

Parker said his agency offers resources for youth ages 13-17 who need treatment in a region that has no options, coordinating placement and increasing access through telehealth options.

The state also collaborates with school districts to help students overcome time and transportation obstacles to treatment, Parker said, and runs prevention and awareness programs across Texas.

But there still has to be a place to send them, providers say. The Phoenix House announcement has sent other Texas addiction treatment providers — most of whom focus on women and adults — scrambling to create more or new capacity for a new influx of younger patients who can’t afford treatment and no longer have Phoenix House Dallas to rely on.

Those other providers are facing the same financial hardships, after years of dealing with stagnant state reimbursement rates and a slow-walking state pay structure they say drains their resources while costs rise.

Youth180, a nonprofit based in Dallas that provides prevention, intervention, and outpatient treatment services to adolescents and their families, are looking into adding residential treatment beds following the closure of Phoenix House, officials there said.

“This is devastating to those adolescents who are on government-subsidized insurance programs or are uninsured in the Dallas area,” said Keri Stitt, president and CEO of Youth 180. “Their ability to access equitable care is significantly diminished simply due to their ability to pay.”

Texas leads the nation in the number and rate of uninsured children. When those kids meet a health care system that is exceptionally underfunded, it can be devastating, Stitt said.

Last Friday, Stitt said, one of her clinic’s 15-year-old patients who was receiving intensive outpatient services overdosed at school. A local hospital kept her over the weekend, but without Phoenix House Dallas to take in uninsured teens like her, she was sent back home on Sunday, Stitt said.

The nearest residential treatment center for girls is two hours away, an impossible trip for the low-income family, Stitt said.

“The family can't drive to Tyler or Houston so there was nothing for them to do," she said.

Stitt said since Phoenix House started winding down its services and word has spread about their closure of programming, their organization has seen their referrals double in a week.

Katharine Neill Harris, a drug policy fellow at Rice University’s Baker Institute, said facilities that focus on youth, as Phoenix House does, are often full.

“The closure of Phoenix House exacerbates the problem of treatment unavailability. It couldn’t come at a worse time, as drug-related deaths in Texas are increasing and more youth are exposed to powerful synthetic opioids like fentanyl,” Harris said. “The closure highlights how unprepared Texas still is in the fight against the overdose crisis.”

Funding problems 

Treatment centers, particularly those that provide residential services, have for years been pressuring Texas Health and Human Services to give them access to more federal block grant dollars intended to pay for substance abuse treatment for uninsured Texans.

“We are actually looking at a capacity crisis looming ahead,” Cynthia Humphrey, executive director of the Texas Association of Substance Abuse Programs, testified in a Sept. 15 HHSC hearing on the rates earlier this month. “It's the residential providers that are bleeding the most, and are really at the precipice of whether they can continue providing services.”

It has gotten more difficult to staff them because it’s hard to pay them competitive rates, providers say. In fact, one provider in Victoria told HHSC officials at that hearing that staff had taken a pay cut in recent years to keep the lights on in their facility.

It’s also hard to attract staff to begin with, as the growth of telemedicine offers more opportunities for counselors and other employees to work from home — a perk that can’t usually be offered in a residential setting, said Dutton, Phoenix House’s chief executive.

On top of that, with the rise in use of fentanyl or drugs laced with fentanyl, a lot of the younger patients now require more intensive and costly treatments, Dutton said.

HHSC sets the rates each year on a per-patient-per-day basis, meting out to providers five-year block grants from the Substance Abuse and Mental Health Services Administration, an agency within the U.S. Department of Health and Human Services.

Dutton’s costs have gone up more than 30% in the past decade.Meanwhile, the state allotments have not met the rate of inflation, Dutton said. In 2014, the state reimbursement to residential treatment centers was $161 per patient, per day. Today, that rate has risen to $168.49 per patient, per day, he said.

“One point many providers have made is that you can hardly find a hotel for that price,” Dutton said. “But we are to provide 24 hours a day of licensed professional care, nursing, psychiatry, counseling, school services, three meals, two snacks, for that rate.”

At Phoenix House centers, which have seen such an influx of uninsured patients that they are now the majority of the group’s population, the state reimbursements now cover less than half of the cost of treating unfunded patients — meaning they operate at a loss every time they take in a new teenager who qualifies for the block grant reimbursement.

Dutton and other agency officials have for several years asked Texas HHSC to support an increase of for at least a 20% increase in the reimbursement rates.

Absent that, substance abuse treatment providers want that the entire amount allocated to them through the block grants be released to them at once, instead of in annual increments, so that they could access that money when they need it most.

“Why are you not providing those of us that use these dollars [the opportunity] to spend them down completely? Why? Nobody has been able to answer that question for me for three years, and trust me I've been asking,” Heather Ormand, CEO of Nexus Recovery Center in Dallas, asked HHSC officials during the hearing. “Those dollars are there for a reason, and we need them to keep providing the quality services that we do.”

In 2022, Phoenix House had been able to use less than 60% of their annual funding for the previous three years, leaving more than $3 million of unused funds for adolescent treatment on the table, Dutton said.

HHSC officials in an email said they are still reviewing public feedback and testimony from treatment centers and others delivered during a hearing two weeks ago on their latest rates for block grant reimbursements. This time, the agency staff proposed a potential 16% rate increase for residential centers.

The new rates won’t be announced until at least next week, but the latest proposals show no meaningful signs that this time would be any different for residential providers, Dutton and others told them in the hearing.

Last year, HHSC staff recommended that residential centers get an even bigger raise, but the request was declined and there was no change, he said.

“I really started to lose faith that we were going to get this right,” Dutton said.

During the hearing two weeks ago, several providers implored HHSC officials to consider how the state would be affected if treatment centers were to shut down.

“The ramifications are the ultimate demise of long-standing statewide service providers which will leave a devastating gap in services, with thousands of Texans unable to access critical [substance abuse] treatment,” said Gary Jenkins, president of the board of directors of the Alcohol and Drug Awareness Center for the Concho Valley, which offers residential treatment for adults in San Angelo. “We’re making an urgent appeal to you because we need your help.”

Ormand, of Nexus Recovery Center, said their organization has actively been trying to increase residential reimbursement rates for the past three years.

“The current and proposed reimbursement rates cover between 65-80% of our costs, depending on the program or level of care, and Nexus has intentionally diversified our revenue sources since 2020 to make up the difference between costs and rates,” she said.

That diversification mostly includes private fundraising, but also other public funds from Dallas County through the American Rescue Plan Act, which will go away in 2025.

“Nexus privately fundraised to cover 30% of our operating budget during FY23, which ended August 31, 2023, and we’ll continue to do so,” she said. “However, when funds go away from things like ARPA, the gap will be even greater if the proposed rates stay as published.”

Dutton said Phoenix House was approaching the same numbers with their fundraising. But because their costs had gone so high and the majority of their patients were uninsured, it was hard to cover the rising costs with donations they were able to secure.

Harris, of Rice University, called the closure of youth services at Phoenix House incredibly unfortunate, but not surprising.

“The unsustainably low reimbursement rates that HHSC pays to providers who treat uninsured patients is a longstanding issue in Texas,” she said.

During the Texas Legislature’s regular session earlier this year, parents whose children died from drug overdoses advocated for increased state spending on drug treatment and greater investment in youth substance abuse services.

They were denied, she said.

“The legislature could have used some of the $32 billion budget surplus to address this problem by providing [state] funding for provider rate increases. It chose not to invest in this area,” she said.

Ormand said her organization and others are assessing the needs in the community left by the absence of Phoenix House and doing their best to fill the void.

“We will step in to ensure no adolescents needing residential or outpatient services fall through the cracks,” said Ormand, whose center only serves women, including pregnant and parenting women.

Stitt said that unless the state steps in with better funding, the situation with Texas youth will just get worse.

"Childhood is what we spend the rest of our lives getting over," Stitt said. "We have an opportunity as a state to step up for the well-being of our children because they are our future. If we don't, and we think youth drug use and overdoses are bad now, this is just the tip of the iceberg."

Disclosure: Rice University has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.