Closure of ketamine clinics leaves patients scrambling

Around 4:30 p.m. last Friday, Ketamine Wellness Centers CEO Kevin Nicholson sent an email: In 30 minutes, the company would no longer be in business, he said. The message went out to some patients and to all of the employees of his company’s clinics across nine states — what had, up until moments before, been one of the largest ketamine clinic chains in the country.

It was an abrupt end to what Nicholson depicted just months earlier as a booming business with plans for new clinics and treatments. To patients, the news came as a complete shock. Things had seemed normal even days earlier, as clients went in for routine ketamine infusions, which are used to treat severe depression, PTSD, and other psychiatric and pain conditions.

Now, people in need of ketamine treatments are left to find new providers, some of them rushing to get appointments before their symptoms come back, they told STAT.

The email from Nicholson, which STAT has obtained, painted a picture of a business deal gone terribly awry. After a decade of growing Ketamine Wellness Centers, the chain had been acquired by Delic Holdings Corporation, a publicly traded Canadian company, in 2021. Neither Nicholson nor executives for Delic could be reached for comment. But Nicholson’s email says the deal quickly soured.

“The purpose of the acquisition was to expand quickly with the promised funding, yet stay on as operators and employees. We opened three new clinics and had two immature clinics at the time,” the email said. “In one year’s time, KWC became the funding arm of Delic instead of the recipient.”

The new clinics didn’t have many patients, and overhead costs ballooned. Starting in November, Nicholson said in the email, he and his wife, Julie, who helped found the clinics, were paying employee’s salaries with their own money. In a last-ditch effort to buy time while they waited for an influx of money that could save their business, KWC closed four clinics last week. But the funding never came.

“So now, unable to pay staff, I am forced to close all operations,” Nicholson wrote. “I do not take this closure lightly and the founders are devastated. If we could turn back time and remain a private company we would do so. We whole-heartedly believe in this life changing treatment. We are very proud of the company we built and greatly appreciate the staff and patients who have become family. I hope our paths cross again someday.”

The chain’s closure is one of the bigger upheavals in the nascent field of psychedelic medicine, which in the past few years has moved from fringe to an industry worth billions of dollars.

Delic, which dubs itself the “leading psychedelic wellness platform” in the U.S., entered the ketamine clinic business when it bought KWC. And the company had high hopes of being able to hinge its growth on the legalization of other psychedelic treatments, such as MDMA and psilocybin. Delic’s executive chairman is Matt Stang, the former chief revenue officer of High Times magazine, which pushed for the legalization of cannabis. Delic Holdings also runs the psychedelic and cannabis-focused Delic Labs out of Vancouver, Canada.

Ketamine Wellness Centers was started in 2015 by the Nicholsons, along with anesthesiologist Mark Murphy and psychologist Ellen Diamond. The first clinic, in downtown Phoenix, specialized in low-dose ketamine infusions. And business soon expanded to satellite 13 clinics across the country, making it the largest privately owned ketamine provider in the nation at the time, according to company documents. By the time KWC was acquired by Delic, it was a promising business: The company had seen a 1,000% increase in treatments in four years, with 12,000 infusions in 2022.

 

Now, all locations are closed.

Jess Aumick, 23, was in the company’s corporate office in Mesa, Ariz., the day everything collapsed. Around 4 p.m, after a day of work, she and about a dozen other employees were called into a meeting room where Nicholson sat with an HR representative. “And then they basically told us, ‘We’re out of money,’” Aumick said.

Nicholson said he was devastated, and told employees he was in the same situation as them, sending out resumes and looking for a new job.

As the company’s digital marketing manager, it was Aumick’s job to run the website and blog, along with social media pages, an online patient support group, and respond to online reviews. She also helped establish a directory of therapists who were trained in ketamine-assisted treatment and could support patients. Aumick had been working there since May 2022, when she moved from her home state of New Jersey after college to take the job, and was just excited to get her foot in the door in the competitive field of psychedelic medicine.

The announcement from Nicholson was unsurprising to her. Another employee, who worked in sales at the corporate office until last year, told STAT the same thing. The writing had gradually appeared on the wall.

Around November, Aumick started hearing from co-workers that the company was running out of money. People had begun applying to other jobs and polishing their resumes. In late December, staff were told to tidy their work stations and dress up for a visit from potential investors, Aumick said. She now thinks Nicholson was counting on those investors to save the company.

When things began to collapse in late February, Aumick said she and a co-worker were asked to write a script for patient liaisons to use when explaining that the clinics were shutting down. Given that KWC catered to patients with psychiatric disorders, they wanted to make sure already-vulnerable patients would be OK upon hearing the news. “It wasn’t a secret among upper management. And in the last few months, it wasn’t a secret in corporate at all,” she said.

On Friday, it was Aumick’s job to update the company website with a banner that read: “Delic Announces Suspension of Ketamine Wellness Centers Operations” and had a phone number and email address for patients to obtain their medical records.

Many patients didn’t find out about KWC’s shutdown until after it occurred. Some have reported showing up for appointments and finding the clinics empty. Others said they even received automated appointment reminders for treatments they would never get.

And employees, other than the dozen or so at headquarters, found out they’d lost their jobs from that Friday afternoon email. The fallout has continued, as employees await their final paychecks, which were supposed to arrive on March 15. That day, Aumick woke up to a negative balance in her account — her $2,000 paycheck from February 28 had been “clawed back,” she learned (she picked up a new check on Thursday, but had issues when she went to cash it).

In an email to employees on payday, Nicholson said KWC was working to “resolve this shortage with remaining funds,” and was waiting on insurance payments from treatments that were administered before the clinics shut down.

“Most people are not handling it well,” Aumick said.

It was a stunning fall, and one that leaves patients especially in the lurch.

The buzz around ketamine for depression and other hard-to-treat conditions has grown in recent years, as evidence of its benefits emerges. A short-lived anesthetic turned party drug, it’s being studied for its therapeutic potential in psychiatric disorders that don’t respond to other treatments.

At ketamine clinics, patients can receive intravenous infusions of the drug. Some of the KWC clinics also offered Spravato, a Food and Drug Administration-approved version of esketamine that comes in a nasal spray, for adults with treatment-resistant depression, major depressive disorder, or suicidal thoughts or actions.

Adam Blazak, 39, first learned of Spravato in 2021 through his psychiatrist at the Veterans Affairs hospital in Tucson, Ariz. Blazak recounted wrestling with mental health ailments for a decade following six years of active duty in the Army. He had been traumatized by a yearlong stint in Iraq in 2008, and by a brutal assault at Fort Hood in Texas. As a gay man in the military during the “don’t ask, don’t tell” era, Blazak couldn’t tell anyone he had been victimized, or find the support he needed. He was afraid of being outed and expelled. “I just had to keep my head down and suffer silently for years,” he said.

When he got out in 2011, he realized he was not the same person. He had PTSD, depression, anxiety, and an onslaught of suicidal thoughts. VA doctors prescribed him treatment after treatment, psychotherapy combined with medication — “I tried every pill imaginable,” at one point taking a handful of them every day — with no luck. At his lowest points, Blazak would wake up and wish he were dead.

It was around then that his psychiatrist recommended he try ketamine nasal spray, which was available at a local hospital. When he hit the maximum dosage, 84 milligrams, it was a revelation. “Like, whoa, where are those thoughts? And it was almost eerie, because I’d lived with those thoughts for so long that to not have them … I felt like I hit the lotto,” he said.

When the hospital stopped accepting his health insurance, TriWest, he learned Ketamine Wellness Centers had partnered with the VA and would take TriWest members. So in October, Blazak received his first IV infusion of the drug at a KWC clinic in Tucson. Over 14 months, he worked up to a much higher dose than he could get with the nasal spray, which allowed him to go longer periods between treatments. TriWest covered the full cost of the infusions. All he had to worry about was post-infusion nausea, fatigue, and getting a ride home from the appointments every four weeks (patients aren’t allowed to drive themselves after an infusion). On his last visit, two weeks ago, Blazak said everything was running smoothly at the clinic, and it was even busier than usual.

He said he’s seen a dramatic improvement in his mental health. Without the suicidal thoughts, he was able to benefit more from other therapies.

Then, on Wednesday, he got an email notifying him of KWC’s closure. He was at a loss.

Now, he has to find a new clinic that will accept his insurance before the effects of the ketamine start to wear off in a couple of weeks. “I’m terrified. I‘m afraid that, without this treatment, the suicidal thoughts will just creep back,” he said.

As a fully disabled veteran, he doesn’t have employment, and can’t afford to pay for treatment out of pocket. He looked through a list of alternate clinics that KWC sent out to patients this week, but many don’t accept TriWest. So far, his best options are driving an hour and a half to Phoenix or four hours to San Diego every month for an infusion. He’s scrambling to find a solution, going as far as to email President Biden through the White House veterans hotline.

“This is something the VA touted to local VAs,” he said. “This isn’t just me and a couple of veterans here in Tucson. This affects veterans throughout the U.S.”

Given growing interest in psychedelic medicine, Ketamine Wellness Centers’ sudden closure was puzzling but not singular. On Wednesday, another major ketamine clinic business, Field Trip, announced it was closing five of its facilities: in Chicago, Washington D.C., Seattle, San Diego, and the Canadian city of Fredericton. The company’s CEO could not be reached for comment. Earlier this month, Oregon’s Synthesis Institute, a magic mushroom therapy center, ran out of money and shut down.

“It’s indicative of a trend in the field,” said Sam Mandel, CEO and co-founder of Ketamine Clinics Los Angeles, which has operated one facility since 2014.

Mandel, who started the LA clinic with his anesthesiologist father, said they’ve been approached “over 40 times” by investors and companies hoping to buy the business — and they’ve said no every time. “We don’t have a whole chain, although we could have, because of quality control and wanting to do things the right way.” Because investors tend to bring demands, he said, clinics like KWC and Field Trip “come to find that money doesn’t solve all of your problems.”

Ketamine clinics have to clear various regulatory hurdles in order to operate, since the drug is a controlled substance that can be dangerous to people with certain health conditions, or if administered incorrectly.

But when properly deployed, it can be life-changing for some patients.

Sadee Brekke, 30, began treatment in May at a Ketamine Wellness Centers clinic near Minneapolis, where she lives. For more than half her life, Brekke had dealt with both passive and active suicidal ideation. She was also diagnosed with bipolar 2 disorder and complex PTSD — all results, she said, of abuse and a tumultuous childhood.

She found out about KWC closing its doors through a Facebook group for the clinic’s patients. She said she never heard from her clinic directly. All she received was a generic email with the news on Wednesday, a few days before she was scheduled to get her next infusion. Her immediate reaction was “panic, anger,” said Brekke, who works as a manager in the fleet department of the Star-Tribune newspaper.

“I have some issues with medical abandonment in general, and as a Black woman, having people listen to my issues,” she said. As her anxiety about losing the treatment intensified, Brekke’s husband started hunting for other clinics.

They were able to find one that would squeeze her in on Friday night, so she won’t have to skip her regular treatment. Whether she stays with that clinic will be based on insurance coverage and cost.

At KWC, Brekke first received six infusions in one week — what’s called a stabilization treatment — and then returned every two or three months for maintenance treatments. She paid out of pocket for each ketamine treatment, at around $450 a pop, and was reimbursed with her flexible spending account. Her insurance wouldn’t cover the infusions, despite her documented diagnoses (she was hospitalized three times in one year for suicidality). Brekke and her husband decided: “If the cost-benefit is you staying alive, we’re just going to pay the money,” she said.

While previous experiences with prescription medications had gone poorly, in one case sending Brekke into “full-blown psychosis,” the combination of ketamine and other medications has worked well, she said. After the initial treatment at KWC, the suicidal thoughts disappeared for the first time in years.

Before ketamine, Brekke could only think about making it through the day. Her artistic potential went untapped, because art didn’t seem like it mattered, she said. All that has changed.

Ketamine infusions were a game-changer for Jori Laws, 46, who was diagnosed with fibromyalgia in her late 20s. Her condition grew worse, to the point where she was taking two powerful opioid painkillers, tramadol and Norco 7.5, three times a day — and her “average pain level was at an eight.” She heard about ketamine for years but could never afford it.

Then, about three years ago, she came across Ketamine Wellness Centers, and saw that a nearby clinic in Naperville, Ill., had infusions for chronic pain that would be covered by her insurance. “I started crying when I saw that,” she said. After an initial sprint to stabilize her (five days straight of infusions), Laws could go for a two-day “booster” every six weeks or so. If she felt fine, like in the warmer months, she could push the treatments back. In the winter, when her pain flared, she could get infusions every four weeks. She has had days that are virtually pain-free, and stretches of time where she feels good enough to play at the park with her granddaughter or go out with family. “I can work eight hours right now, come home and still be able to cook something,” she said. “It’s a life for me that I never had.”

The treatments also had the added bonus of easing some of the symptoms of anxiety and bipolar disorder, she said.

Her next appointment at the KWC clinic was scheduled for Monday. If it weren’t for a voicemail from one of the clinic employees telling Laws that KWC shut down, “I would’ve shown up this Monday and sat in the parking lot,” she said.

Over the next few days, she’ll spend her lunch break with a list of clinics in her area, calling to see if they accept her insurance, in hopes of getting a ketamine booster before her pain returns.

If you or someone you know may be considering suicide, contact the 988 Suicide & Crisis Lifeline: call or text 988 or chat 988lifeline.org. For TTY users: Use your preferred relay service or dial 711 then 988.

STAT’s coverage of chronic health issues is supported by a grant from Bloomberg Philanthropies. Our financial supporters are not involved in any decisions about our journalism.