Dr. Ken Weiner started Eating Recovery Center (ERC) in 2008 with a vision for a fully vertically integrated healthcare system devoted to treating serious eating disorders. Since then, the company, which treats patients of all ages, has experienced robust growth in nearly every metric. The secret, according to Weiner? Hiring the right talent and holding them tight to the companywide mission of delivering best-in-class care.
Brown Brothers Harriman recently visited ERC’s Denver headquarters during an exciting time: This past August, the company entered into an agreement to sell a controlling stake in the business to a private equity firm. We sat down with Weiner to discuss his criteria for identifying the best partners, the power of a unique vision and the criticality of hiring the right people, among other topics.
Brown Brothers Harriman: Tell us about your background and what led you to start Eating Recovery Center.
Ken Weiner: I went to medical school for psychiatry, and eating disorders have always been my area of expertise. I found them intriguing.
I was born with an entrepreneurial side, so after graduating medical school, I started an outpatient eating disorder program. During that time, I read about the concept that you can only be successful to such an extent when operating as an individual, the reason being that you are selling your time. If you really want to be successful, you must get to a point where people are working with and for you. It was through this concept that I learned to appreciate the advantages of a company.
I began opening and overseeing programs for hospital systems, which taught me a lot about running a business. In 2001, I started a successful PHP/IOP program.1 Unfortunately, my financial partners were not a good match, so I exited the company. Through that experience, I learned that partnerships are like a marriage: If you have the wrong partners, the dynamic will not work.
When choosing new partners for Eating Recovery Center, I focused on identifying individuals who could do things I could not. After raising funds, we opened in 2008. I had a different vision than what was present in the industry – to create a fully vertically integrated healthcare system exclusively devoted to the treatment of serious eating disorders. The combination of an experienced team and a differentiated vision helped us successfully open and build the program.
BBH: Talk about the process for creating internal business partnerships and what you look for.
KW: With Eating Recovery Center, I had five founding partners who all brought something different to the table. I made sure that each was an owner in the company and received ownership interest.
Over time, I have come to appreciate that integrity is as important as competence when it comes to partnerships. I only surround myself and partner with people who have the highest level of integrity. If somebody wants to tell me it’s just business, that person is not my partner. To me, that is often an excuse for making poor short-term financial decisions that are not going to evolve into long-term success.
BBH: How did you approach the financing of the business leading up to and after the launch?
KW: To fund the business initially, my wife and I raised money from family and friends. She was so helpful, and it showed that she truly believed in what I was doing. The company also borrowed money from a bank. We opened the doors to Eating Recovery Center during the financial crisis, and despite that, we were profitable on an accrual basis 45 days later. Companies like ours bleed cash, though, because there is a delay in receiving payments from insurance companies, so financing was always top of mind.
In 2010, we had an opportunity to grow when a local behavioral health hospital closed. The bank repossessed the building, so in order to take advantage quickly, we ran a short fundraising process and brought in a private equity firm as a minority investor. Then, in 2012, we engaged an investment bank and ran a full fundraising process that resulted in multiple offers. The company we chose was our majority partner until recently, when we finished the process of partnering with another private equity firm.
With private equity firms, I set the same bar for integrity as I do with any other partner, and my experience has been positive. I find them helpful in terms of data, analytics and helping us to have the information to make good decisions.
BBH: Have each of the transactions ERC has completed been contingent upon you staying with the business?
KW: It took me some time to develop a full appreciation of the value I bring to the company from an investor’s perspective. During our recent transaction, my private equity partners at the time and the investment bank we worked with asked me if I realized how it would affect the company’s valuation if I was not committed going forward. I had never thought of myself as being critical, but there is no question that private equity firms view it that way. They see it as, “You have built and grown this from the beginning, and we want you here.”
BBH: What is one of the biggest challenges you have faced over the lifetime of the business?
KW: I think about the goes, not the woes, so it is difficult for me to pinpoint something that went wrong. I will say that when I look at the business plan that we presented to investors in 2008, we have done almost nothing that we said we were going to do – except grow. The way I thought we would grow when we launched, though, is completely different than what we have done.
Despite that, our valuation with our new sponsors indicates that we have been over 11 times more successful than we said in 2008. We threw out a valuation figure that we thought we could achieve and blew that away. That required flexibility in terms of understanding our industry, positioning ourselves and, thus, determining how to grow. I give my private equity sponsors credit for helping us with our growth plan.
BBH: You said earlier that you had a vision of being fully vertically integrated. Talk about how that was differentiated and took shape.
KW: Fully vertically integrated means you have all levels of care for people with severe and extreme eating disorders. We have inpatient care, residential care, partial hospitalization and some IOP services. This continuum is a different model of care, and it is rare, partly because it is very physician-reliant. You need to have psychiatrists and internal medicine and/or family practice doctors, so the number of physicians required adds up.
Hiring the right staff has allowed us to successfully turn this vision into a reality. Our people are our greatest asset and also our greatest rate-limiting factor, so we need the best across the board.
BBH: Beyond your vision and staff, are there any other differentiating features of ERC that have allowed you to succeed?
KW: Yes, thought leadership. We currently have nine national thought leaders and 11 emerging regional thought leaders – numbers that are far higher than the industry norm. We invested early on in having the best thought leaders, and this has been such an important part of our growth.
BBH: How do you ensure your staff continues to provide the highest quality of care? Is there a mission that is a driving force?
KW: We are a mission-driven company. Everything starts with our mission to take the greatest care of patients, their families and referring professionals so that they view us as best in class. Staff members must keep that mission in mind always. Taking care of patients with such a difficult illness is not easy, so the team needs to remember why we get up every day to do this.
Minimizing employee turnover is critical to our quality of care, so taking as good of care of our staff as we do of our patients is important and a key element of success. Because of this, we put a lot of effort into acknowledging and rewarding our team. We have acted like a big company since day one, including offering employee benefits such as a 401(k) with a match, healthcare and paid time off.
Anorexia-nervosa has the highest mortality rate of any psychiatric illness, so the stakes are high. About 0.5% of individuals with this illness die annually. For those who have had the illness for more than 20 years, the odds of dying are over 20%. All of our patients are exceptional people who have serious illnesses. The beauty of that is that when you help them get well, the sky is the limit.
BBH: You talked about Eating Recovery Center’s mission. Tell us about your culture.
KW: Just like we have been with our mission of taking the greatest care of patients, their families and referring professionals so we are considered best in class, we have always been incredibly intentional about our culture. There are five pieces to it – three Cs and two Is.
The first piece is compassion – you must care deeply about our patients and their families if you are going to work here.
The second component is collaboration. Internally, we have to be a functional family. Otherwise, patients get distracted by our staff; they lose focus and lose the opportunity for a life-changing experience. Externally, I always tell my staff members that they are my ambassadors to the world. When they tell others that they work at Eating Recovery Center, what they say next sets the template for how that person understands who we are and what we do.
The third piece is competence. This is a high-competency organization, and we demand a lot of ourselves. When you first join the company, it is your time to ask a lot of questions because after a while we expect you to know.
The next piece is something that I mentioned earlier: integrity. Everything from start to finish has to be done with the highest level of integrity.
Last is innovation. We have an obligation to elevate the field of eating disorder treatment – determining what works, what doesn’t, how we make change happen and so forth.
BBH: ERC has undergone rapid, impressive growth since its founding. How have you approached expanding geographically?
KW: When we started Eating Recovery Center, we had 40 employees, one facility, 12 beds and 12 partial hospitalization slots. We now have 1,100 employees, 25 facilities in seven states, 208 beds and 440 partial hospitalization slots.
We have grown three ways – organically, via acquisition and de novo. Between 2008 and mid-2011, all of our growth was organic and in Colorado. In 2011, we started acquiring and partnering with programs around the country, including California, Washington, Chicago, Texas and South Carolina. Our revenues in Chicago illustrate the best indicator of finding the right synergy and partner. After partnering toward the end of 2013, we grew revenues by 110% between 2013 and 2014. Then, from 2014 to 2015, we grew another 55%. That is a reflection of the success you can achieve by having a shared vision of how to grow. In 2014, ERC began our de novo approach, which is now in several states.
We use a sophisticated tool to identify opportunities based on criteria, but ultimately, we either need the right local regional people or Eating Recovery Center culture carriers who want to relocate to grow in the organization and help us expand.
BBH: Have you started thinking about succession planning?
KW: I am always thinking about succession planning, but I am all in with Eating Recovery Center, which I sometimes refer to as my fifth child. I love this company, and it is my legacy. How many people are lucky enough to have that? We are going to undertake many exciting initiatives over the next few years to move to the next level, and I want to be here for that.
Looking further out, given how I am wired, I need to retire to something, not from something. Because of that, I have started working on what I want to do next, both from a philanthropic standpoint as well as board participation.
BBH: On the topic of philanthropy, you started the Eating Recovery Foundation, a national resource for individuals affected by eating disorders. Tell us about the foundation.
KW: At Eating Recovery Center, we do good, and we do well. We take incredibly good care of patients, families and referral sources and in doing so have performed very well.
I feel strongly that if you are lucky enough to do exceptionally well, you have an obligation to give back and take care of others. Because of this, in 2012 we created the Eating Recovery Foundation, which serves multiple functions. First, we conduct research in areas where we want to innovate and identify what does and does not work in the field of eating disorders. We also support the Body Project in North America, which has eating disorder prevention programs on college campuses. In addition, we have an online librarian who is available to help eating disorder industry professionals identify the best resources when they have a question or problem related to patient care. We also sponsor a young researcher each year, and we help support and fund patient care.
The foundation is a critical part of what we do, and I am extremely proud of our efforts and results.
BBH: Dr. Weiner, thank you for your time and insight.
Interview conducted by Jake Turner, and article written by Kaitlin Barbour.
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1 PHP: partial hospitalization program. IOP: intensive outpatient program.