A BUSINESS BUILT ON THE TROUBLES OF TEENAGERS

Mary Ann Davies has spent more than $100,000 in the last year to send
her 16-year-old daughter to one private counseling and educational
program after another. She has just signed up to go further into
debt, committing herself to spend another $100,000 over the next two
years for a boarding school in New York that she hopes will help her
daughter overcome a drug problem.

"We're saving this life," said Ms. Davies, who works in advertising
in Richmond, Va. "You can't put a price on that."

More and more parents of troubled teenagers are following the same
course and sending their children to special programs - no matter the
cost. At the same time, the number of programs available has soared.
They differ from the tough boot camps and the long-term psychiatric
stays that were the main options a couple of decades ago. The new
"feel good" programs combine therapy and education, often in an
outdoor setting, at an average cost of $5,000 a month.

Those numbers have drawn the attention of some big money investors,
who see a growing need for the kind of services these programs
provide. Although there have been allegations of abuse within the
industry, and those have garnered most of the media attention on the
schools, officials at several companies said almost all the incidents
had been at a handful of less reputable programs.

At the same time, the influx of money from investors seeking a high
return on equity is worrying some traditionalists in the field, who
are concerned that the bottom line may take precedence over students'
needs. So far, they said, the schools are able to charge enough to
make solid profits while keeping most customers satisfied.

"If you've got a child with problems, this is your most precious
asset, and I don't think any parent would ever cut corners if they
thought there was a way to help their child through the problem
they're experiencing," said Joseph Kenary, the president of the
corporate finance business at CapitalSource Finance, a lender to the
Aspen Education Group, based in Cerritos, Calif., and one of the more
prominent providers of programs for troubled teenagers. If the
programs are "run well, if they're full, they generate a pretty
attractive return on a cash-on-cash basis."

No one tracks the industry's enrollment, revenues or claims of
success or failure, in part because the programs fall through the
regulatory cracks and in part because the industry is still so
fragmented. But financial analysts and educational consultants
estimated that the number of teenagers attending such programs had
quadrupled since 1995, to as many as 100,000 this year. They estimate
that annual revenues now total at least $1 billion.

Venture capital firms like Warburg Pincus and the Sprout Group, a
division of Credit Suisse First Boston, have found it a promising
business opportunity.

Two of the larger private companies, Aspen and Three Springs, based
in Huntsville, Ala., have been buying up smaller programs and
founding new ones. Universal Health Services, a public company that
primarily owns hundreds of hospitals, has expanded into teenage
behavioral programs.

John L. Santa, a co-owner of Montana Academy, a school based in
Marion, Mont., that he co-founded in 1996, and president of the
National Association of Therapeutic Schools and Programs, said he had
been approached several times by companies looking to buy the school.
But he decided not to sell, even though he said he believed that most
large companies had been doing a good job so far.

"You're caring for individual kids," Dr. Santa said. "You're not
making widgets. There's a fear as you move into a more corporate
structure, you will lose some of what we do."

In contrast with companies focusing on general education - like
Bright Horizons Family Solutions, the day care provider, and Edison
Schools, the charter school company - the behavioral programs are
dealing with a population that presents a higher risk.

"These kids are difficult," said Andrew E. Kaplan, a partner at Quad
Ventures, a private equity firm that has been looking to invest in
the field for about four years. "If something bad happens at one, it
may be something that's completely out of your control. You may have
done everything right, and still something happens."

Officials at the programs acknowledge that their type of therapy does
not work for all teenagers. Even parents who were happy with the
programs said they were not sure whether their teenager had simply
matured or had changed because of the experience.

The teenagers who attend these programs have often been diagnosed
with attention deficit disorder or other behavioral problems and are
taking medications. Some have used drugs or have been sexually
abused. Many have been in trouble at school or in minor trouble with
the law. Others have run away from home or stolen from their parents.

The National Association of Therapeutic Schools and Programs lists
140 schools and programs, about 100 more than it listed in 1999. But
educational consultants, who advise parents on these programs, say
the total number of programs available is now closer to 300.

Since 1990, Lon Woodbury, an educational consultant who has published
a newsletter on the industry for 15 years, said he had noticed an
increase of 20 to 30 percent in the number of help programs for
teenagers. In June, he wrote a column saying that there was still
"plenty of room" for new programs.

"All indications are that the market is still growing," he wrote.
"The consensus is that increasing numbers of children are in trouble
and are not growing up very well."

It is not clear, however, if more teenagers have problems than a
generation ago or if more parents are sending their teenagers away
for help. Educational consultants said there seemed to be less of a
stigma about seeking therapy today.

Perhaps most important, more parents have the disposable income or
the equity in their homes to pay the typical price of $400 a day for
an outdoor program. While most parents have to pay the bills
themselves, some also receive help from their school district or
insurance company.

The field began to commercialize in the mid-1990's. In 1998, the
Sprout Group and Frazier Healthcare Ventures of Seattle bought the
majority of Aspen, a company with a handful of programs at that time
but with major plans to expand. In 2002, Warburg Pincus invested $15
million in Aspen; around the same time, the company received at least
$48 million in loans from CapitalSource and Caltius Mezzanine, two
companies that specialize in lending to small and midsize companies.

Investors are particularly drawn to the field because it is almost
entirely supported by individual payments rather than being dependent
on public financing. "I've been in the private equity business for 15
years, and I don't like to invest in companies where, with one strike
of a pen, you can wipe out your business," said Nader J. Naini, a
general partner with Frazier Healthcare and also the chairman of Aspen's board.

Since Frazier invested in Aspen, Mr. Naini said he had been
approached several times by other groups wanting to buy the company.
Frazier is in no hurry to sell its share, though, he said, because he
expects continued growth.

Aspen and similar companies may go public at some point, company
officials said. If Aspen went public, it would have to open its books
to investors, allowing them to see its profit margins and operating
costs. The company has 31 programs in 11 states, up from 6 programs
in 1998. Aspen has recently expanded into the obesity market,
offering schools and camps for overweight teenagers.

Industry analysts estimate that the companies typically generate
profit margins of 10 to 20 percent.

Kirsten Edwards, an equity research analyst at ThinkEquity Partners,
a research and investment banking firm in San Francisco, said larger
companies were more efficient because they could spread the cost of
their curriculums, marketing and overhead as they expand.

Universal Health Services, the hospital management company, acquired
12 properties from Charter Behavioral Health Systems for $105 million
in 2000. That acquisition included the Provo Canyon School in Utah,
which has been around since the 1970's as a help center for teens.

The company is set to take over several therapeutic schools that were
run by CEDU Education, the earliest large company in therapeutic
teenage help and a branch of Brown Schools, now bankrupt. Brown,
which was based in North Palm Beach, Fla., went bankrupt in March
largely because of lingering legal costs from lawsuits filed by
several former students, said a spokesman for McCown De Leeuw, the
private equity firm that owned Brown. Universal Health's bid of
$13.35 million for the properties has been accepted by the bankruptcy
judge, and the sale is expected to close at the end of the month,
said George L. Miller, a partner at Miller Coffey Tate in
Philadelphia and the bankruptcy trustee for Brown.

Another private company, Three Springs, has seized on the market
growth in the last five years, adding six new programs. Three Springs
now has 25 programs, and may continue to expand.

"What we are trying to do is build a continuum," said Sharon Laney,
the company's chief operating officer. "If the kid does not fit this
model, we have another."

Many teenager help programs were founded by counselors and therapists
wanting to start their own businesses or by people who have had
troubled teenagers in their lives. Some parents of graduates of these
programs - among them Joel J. Horowitz, chairman of the board and the
former chief executive at Tommy Hilfiger - have been so impressed by
the schools that they have started foundations to help finance the
programs for those who have trouble affording them.

A new reality television show on ABC this summer, "Brat Camp," which
shows a wilderness program in action, could spur even greater
interest by giving more parents insights into the programs.

Ms. Davies, the Richmond mother, said she wished she had found her
daughter's new school in New York sooner. The other programs her
daughter attended, she said, were not the right matches - and they
cost a lot of money.

For now, Ms. Davies said, she is focusing on her hopes that her
daughter will have a breakthrough and realize that she needs to
change. But she said she was also wondering how she and her husband
would meet all the bills. Already, they have dipped into their home equity.

"We're going have to reconcile this at some point, and it's going to
be tough," she said. "I don't think we have a choice."