The addiction treatment world looks very different today than it did even a decade ago. Small nonprofits are competing with corporate-backed giants. Margins are thinner, documentation rules are tighter, and clients stay for shorter periods. Meanwhile, provider organizations—especially those working with the most vulnerable populations—are constantly pressured to do more with less.
Dr. Dale Klatzker has seen it all firsthand. On the latest episode of No Notes, the longtime behavioral health CEO joined host Dr. Denny Morrison, Chief Clinical Officer at Eleos, to reflect on what’s changed in the substance use disorder (SUD) field—and where technology like AI could offer real value without compromising the human connection at the heart of recovery care.
Tools like AI, Klatzker said, can’t replace people—but they can:
- Make it easier to carry knowledge forward,
- Support care continuity across entire care teams,
- Catch compliance issues early, and
- Let providers focus on what matters most.
Their conversation covered everything from the growth of lived-experience workforces (like peer counselors), to the challenges of scaling small mission-driven programs, to how AI might be the “force multiplier” SUD organizations need to survive what’s ahead.
Want to listen to the full episode? Check it out here.
The Changing Landscape of Addiction Treatment
As noted above, the SUD treatment field has changed dramatically in the last few years—and not necessarily in ways that make care easier to deliver.
“It’s a fragmented industry,” Klatzker said. “There are a lot of very small, mom-and-pop kinds of organizations who do this as a passion and as a mission.” Some of these nonprofits thrive despite limited resources. Others, he noted, “struggle.”
Market Consolidation
At the same time, the industry has seen the growth of what Klatzker called “extremely large aggregators—organizations that saw the fragmentation and said, ‘This is a perfect opportunity to combine operations, get scale, get scope, and use our market abilities to go after commercial insurance and advertising.’” Private equity firms, venture capital groups, and major health systems moved aggressively into addiction treatment, attracted by the potential profitability of commercially insured clients.
As reimbursement models shifted and managed care organizations began to “squeeze every dollar out of everything they could squeeze,” margins grew slimmer. As a result, Klatzker explained, large providers that once focused exclusively on commercial insurance began moving into Medicaid and grant-funded populations, often “begrudgingly.”
Growing Competition
When Klatzker first arrived at Gaudenzia—where he served as CEO from 2019–2024—he asked his staff where most of their clients came from. The answer surprised him. “The number-one referral source was word-of-mouth, which is terrific,” he said. “Number two was these large for-profits sending me all their Medicaid business because they didn’t want to serve that population—complicated population, poor reimbursement.”
But today, addiction treatment providers like Gaudenzia face direct competition from organizations that once ignored those populations.
“We didn’t have to compete so much before,” Klatzker said. “Now, it’s much harder. And the competition is hard for SUD providers, because they don’t have the capital. They don’t have the scale or scope generally. It’s a much more challenging environment when you have big dogs and little dogs.”
Unique Workforce Dynamics in SUD
Staffing in addiction treatment has always looked different from staffing in other areas of behavioral health. According to Klatzker, when he arrived at Gaudenzia, “over 50% of the employees I had—and I had 1,300 staff—were people with lived experience.” Many were graduates of recovery programs themselves. But, these peer support staff often do not have formal therapy training or credentials.
“A lot of it was unregulated for years and years and years,” Klatzker explained. Still, what these staff members lacked in formal credentials, they brought in engagement and empathy. “People had passion and commitment,” he said. “It’s a very powerful model.”
As Morrison pointed out, peer involvement has been foundational to the addiction recovery movement for decades—long before it was introduced in the broader behavioral health community. He and Klatzker both emphasized the unique value lived experience brings in SUD—fostering a degree of client-provider trust and rapport that simply cannot be replicated with formal education alone.
As workforce shortages continue to impact behavioral health organizations across the country, the SUD field’s early embrace of peer providers is both a strength and a challenge. While passion and lived experience are essential to effective addiction treatment, they are not a substitute for comprehensive teams that bring deep clinical expertise. “What you need is a whole cadre of people with different skill sets to be able to do the work,” Klatzker said.
Why Technology and AI Adoption Have Been Slow (and Why That’s Changing)
Technology adoption has long been slower in addiction treatment compared to other areas of healthcare. According to Klatzker, limited capital has been a major factor.
“Because SUD providers have not had a lot of capital, things have been done more informally, more manually, more kind of on the fly,” Klatzker said.
In smaller organizations, tight margins have often meant that basic operations come first—leaving little room for investment in technology.
For larger organizations, the hesitation came from a different place. “For the bigger shops, in my experience, they don’t want to spend the money on technology,” Morrison said. Many built their business models around simpler billing structures and were slow to see the need for more complex tech systems.
Cultural Resistance
Cultural resistance has also played a role. For decades, providers in the addiction space prioritized direct client work over documentation or administrative systems.
“If you don’t have time for the administrative stuff or the paperwork or the documentation, [the mindset was] it’s okay, because we’re really here to help people,” Klatzker said. While that approach might have worked when oversight was minimal, it has become increasingly risky as regulatory scrutiny has intensified.
Addiction Treatment Stigma
Stigma has further slowed innovation. “Even though it is so pervasive, [addiction] is so stigmatized,” Klatzker said. And that stigma has often translated into less funding, less investment in technology, and slower modernization across the field.
But the pressure to change is growing. As Medicaid expansion and managed care oversight increase, and as payer audits become more aggressive, SUD organizations are realizing that technology is no longer optional. AI, in particular, offers organizations a way to meet these rising demands without sacrificing the human relationships that remain at the center of effective substance use and addiction treatment.
Learn how Gaudenzia cut staff documentation time in half with Eleos. Read the case study.
How AI Can Make an Impact in SUD Treatment
Throughout their conversation, Klatzker and Morrison outlined several ways AI can help addiction treatment providers manage today’s growing demands without losing focus on care.
Here are a few key areas they highlighted:
- Improving compliance and reducing audit risk: AI solutions like Eleos Compliance can review 100% of notes for quality and regulatory adherence, eliminating reliance on manual spot checks. This helps organizations catch problems early and strengthens documentation across the board.
- Preventing payer clawbacks: Better documentation at the point of care means fewer billing errors and fewer denied claims. As Klatzker emphasized during the podcast, clawbacks should not be treated as “the cost of doing business.” Avoiding them protects financial health and stability.
- Supporting continuity of care across staff transitions: When providers leave an organization, AI-supported documentation ensures that client histories and treatment plans are clear and consistent. This enables clients to continue progressing in care, even with shifts in care teams.
- Freeing up providers and peer staff: By automating administrative tasks like note-taking and compliance checks, AI gives providers more time to build relationships with clients—the foundation of effective addiction treatment.
- Enhancing training and supervision: AI tools can also support professional development by providing real-time feedback and insights that supervisors can use to coach staff more effectively. This is particularly valuable in settings like SUD, where many team members lack formal therapy training.
Addiction treatment providers are facing more complexity and competition than ever before. The organizations that succeed in this new reality will be the ones that protect what matters most: human connection, care quality, and long-term sustainability.
As Klatzker put it, “Technology is a force multiplier—it helps us focus on what matters.” AI will never replace the work of recovery care providers, but it can give them the support they need to keep delivering that care in an increasingly challenging environment.
To hear more of Klatzker and Morrison’s conversation about the future of addiction treatment and technology, listen to the full No Notes episode here.
