Faithful Friend: Peizer’s Weimaraner roams the company offices with him.

Faithful Friend: Peizer’s Weimaraner roams the company offices with him. Photo by Ringo Chiu.

Investors seem to like the company’s trajectory. Shares in the publically traded company have risen more than 200 percent over the past year, boosting the company’s value to $170 million. Its stock closed at $11.70 on Dec. 6.

“We just started,” Peizer said. “We’re in the first batter in the first inning … but the numbers will get very big, very quickly.”

The game has also completely changed for Catasys – originally launched as Hythiam Inc. in 2004 – and its founder Peizer, a financier once dubbed a “Zelig of Wall Street” for his investments in dozens of private firms.

A former trader at Beverly Hills-based Drexel Burnham Lambert, Peizer is also known for testifying against Michael Milken, who pleaded guilty to violating securities laws during the junk bond scandal of the 1980s.

Peizer, spurred by a half-brother’s struggle with addiction, launched Hythiam in order to market a drug cocktail to treat substance abuse. But the so-called Prometa treatment ran into headwinds after its effectiveness was criticized.

A decade ago, Peizer, a native of Ohio, changed the company name to Catasys, and developed a proprietary system aimed at creating a leading AI- and tech-driven health care company.

Its mission: to solve the hidden, high-cost problem of untreated behavioral health conditions.

Cost reduction

Nearly a third of the total medical bills for managed care patients – or $400 billion, according to Catasys – stems from claims made by those with chronic illnesses such as diabetes, hypertension and congestive heart failure, coupled with depression, anxiety, and alcohol and drug abuse.

There are 4 million patients with these chronic illnesses who also have behavioral health disorders. Patients who fall into both these categories can cost health plans an average of $30,000 a year.

Catasys employs a proprietary analytics platform to search health care claims to ferret out such high-cost patients.

Then it reaches out to enroll them for OnTrak treatment at an average cost to health plans of $6,400 per patient. The program stresses human engagement by a support team of doctors, psychologists and nurse-care coaches.

The company has spent $220 million since its inception to get to this point, Peizer said.

The result, he said, is a drastic reduction in managed care costs. Health care providers see a 54 percent savings per enrolled member – an average of $16,200 a year. Catasys claims that nets out to a 5-to-1 return on a two-year investment. The savings allow health plans to pay all of the patient’s treatment costs.

“We were the first ones to have real data to present to the health plans,” Peizer said, in a Brentwood office adorned by a Peter Max Statue of Liberty painting, Lakers jerseys and a Cleveland Browns football, and accompanied by his large gray Weimaraner. “You need to use technology – (artificial intelligence), and our analytics – because these patients are care-avoidant. The health plans don’t know where they are.

“We find them,” he said. “Catasys’ success is measured by health care improvement: less visits to the hospital, less ER visits, less inpatient stays. And a longer life.”


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