Acadia Healthcare (Nasdaq: ACHC), one of the nation’s leading behavioral health providers, is positioning itself for significant expansion in 2020. During the company’s fourth-quarter and year-end 2019 earnings call, CEO Debbie Osteen outlined plans to add approximately 600 beds across new and existing facilities, alongside a robust pipeline of around 30 potential partnership projects. This ambitious growth strategy comes amid the planned sale of Acadia’s United Kingdom operations, which could provide additional capital for domestic expansion.
“We are pursuing a purposeful and best-in-class growth trajectory,” Osteen told investors. “As we continue to grow our four lines of business, you will see the synergies, complementary investments, and corresponding operating leverage we can achieve through this approach. We believe Acadia is in the ideal position to meet the tremendous market needs that exist.”
Current Operations and Service Offerings
Headquartered in Franklin, Tennessee, Acadia Healthcare operates more than 220 facilities across 40 states and Puerto Rico. Its facilities include inpatient psychiatric hospitals, specialty treatment centers, residential treatment centers, and outpatient clinics. These sites provide a wide range of mental health services, including treatment for eating disorders, trauma, substance use disorders, and co-occurring conditions.
Additionally, Acadia maintains 361 facilities in the United Kingdom. The U.K. operations, which accounted for roughly 35% of total revenue in 2019, are in the process of being sold. The divestiture will allow Acadia to focus more fully on its domestic growth plans and reinforce its commitment to expanding behavioral health services in the U.S.
The UK Sale and Domestic Expansion
The decision to sell the U.K. business follows years of financial challenges overseas. Osteen reported that the company has received multiple non-binding offers from prospective buyers and is now moving into the second phase of the sale process. Interested bidders are reviewing proposed transaction documents and conducting confirmatory due diligence.
The sale is expected to close in the second or third quarter of 2020. While the exact use of proceeds has not been finalized, CFO David Duckworth indicated that the funds would likely be used to deleverage the company and support future growth initiatives. This strategic move positions Acadia to capitalize on domestic opportunities, including new partnerships and facility expansions.
Expanding Partnerships and Joint Ventures
Acadia has a well-established history of joint ventures, a key component of its growth strategy. Currently, the company has five operational JVs, three under development, and numerous others being considered. CEO Osteen emphasized that the integration team has seen a surge in interest from health systems looking to partner with Acadia, resulting in a pipeline of approximately 30 potential projects.
These partnerships typically involve Acadia collaborating with non-profit or community health systems to expand behavioral health services in underserved areas. Most of these new facilities are expected to be between 100 and 120 beds, a standard size that allows for efficient operations while maintaining high-quality care.
Facility Expansion and Bed Additions
Acadia plans to establish six new comprehensive treatment center denovos in 2020. In addition, the company aims to add around 600 beds across its network of existing and new facilities. This follows a strong performance in 2019, during which Acadia added 519 U.S. beds.
The expansion not only addresses growing patient demand but also positions Acadia to leverage operational efficiencies. By increasing capacity, the company can serve more patients, enhance treatment access, and strengthen its presence in key markets across the country.
Opportunities in Medicare and Opioid Treatment
Another critical component of Acadia’s growth strategy is capitalizing on recent changes to Medicare coverage. As of January 1, 2020, new Medicare Part B provisions allow for coverage of opioid use disorder treatment.
“While it is too early to decide the full benefit, we expect that this will drive volume growth by treating new patients and allowing improved coverage and access for dual eligible patients,” Osteen said. This legislation opens up additional revenue streams and aligns with Acadia’s mission to provide comprehensive behavioral health care to a broader patient population.
Financial Performance and Market Impact
Acadia’s Q4 2019 revenue totaled $780.2 million, a 4.9% increase from the previous year. For the full year, revenue reached $3.1 billion, up slightly from approximately $3 billion in 2018. Despite these gains, the company reported a net loss attributable to stockholders of $11.3 million, or $0.13 per diluted share, in Q4. While this reflects an improvement from Q4 2018’s net loss of $331.6 million, it demonstrates that Acadia remains focused on balancing growth with financial performance.
Market reactions were mixed, with Acadia’s stock closing at $29.60, down more than 5.8% in end-of-day trading. Analysts and investors are closely monitoring the company’s strategic initiatives, including the UK divestiture, new partnerships, and bed expansions, to gauge their long-term impact on the company’s financial health and market position.
Strategic Vision for Growth
Acadia’s growth strategy represents a multifaceted approach to expanding its footprint and increasing access to behavioral health care. By combining strategic partnerships, new facility construction, and leveraging policy changes in Medicare, the company aims to address the growing demand for mental health and substance use disorder services.
CEO Osteen highlighted the importance of pursuing synergies across Acadia’s four lines of business, which include inpatient psychiatric hospitals, specialty treatment centers, residential treatment centers, and outpatient services. These synergies are designed to enhance operational efficiency, improve patient outcomes, and increase the company’s competitive advantage in the behavioral health sector.
Challenges and Considerations
While the growth trajectory is promising, Acadia faces challenges common in the behavioral health industry. These include staffing shortages, regulatory compliance, and potential market saturation in certain regions. Additionally, the timing of the UK sale and the deployment of capital for domestic expansion will be critical factors in determining the success of upcoming initiatives.
Acadia’s leadership appears confident in its ability to navigate these challenges. The company’s experience in managing joint ventures, expanding bed capacity, and integrating new facilities provides a foundation for sustainable growth and improved patient care delivery.
Looking Ahead
As Acadia continues to execute its growth plans in 2020, industry watchers are paying close attention to the company’s ability to scale operations effectively while maintaining high standards of care. The combination of new partnerships, added beds, and targeted policy-driven opportunities presents Acadia with a unique chance to solidify its position as a leading behavioral health provider in the United States.
With a clear vision and a robust pipeline of projects, Acadia Healthcare is poised to expand access to critical behavioral health services, meeting the increasing demand for mental health and substance use treatment across diverse communities.
Conclusion
Acadia Healthcare’s plans for 2020 underscore the company’s commitment to growth and innovation in behavioral health care. With 600 new beds, a pipeline of 30 partnership opportunities, and strategic initiatives targeting Medicare and domestic expansion, Acadia is positioning itself for a year of significant development. While challenges remain, the company’s proactive approach and operational expertise provide a strong foundation for meeting the evolving needs of patients and strengthening its market presence.
