Acadia CEO Bullish on Prospect of Expanding Existing JV Partnerships Into New Markets

As Acadia Healthcare’s (Nasdaq: ACHC) business continues to stabilize, the behavioral health powerhouse has its sights set on a 10% EBITDA growth rate over the next five years.

Joint ventures (JV) with big name health care partners — including those with whom Acadia already has relationships — will play an important role in helping the company hit that target. CEO Debbie Osteen said she sees the potential for Acadia to prove itself to existing powerhouse partners, then build additional JVs with those companies in different markets.

“That is something that we’d like to see happen,” Osteen said during a recent presentation at the 2021 Jefferies Virtual Healthcare Conference.


Acadia is the largest standalone behavioral health provider in the U.S., with 227 behavioral health facilities across 40 states and Puerto Rico.

Currently, it has seven JV partnerships in place and five more to be announced, as well as several letters of intent (LIOs), Osteen said during the presentation.

One such existing JV is located in Nashville, where Acadia recently opened a new behavioral health hospital in partnership with Ascension Saint Thomas.


Headquartered in St. Louis, Missouri, Ascension is one of the largest private health systems in the U.S. The national health system operates more than 2,600 locations across 19 states and D.C. That includes 146 hospitals and more than 40 senior living facilities.

Given the health system’s reach, Osteen sees the potential for the pair to form JVs in additional markets if the Nashville arrangement goes well.

“As we prove [what we can do,] we think that gives us an entry into additional opportunities within the bigger systems,” she said, also naming Adventist Health as a player potentially interested in expanding its relationship with Acadia. “In California, with Adventist, … I think they’re also interested in what more we can do.”

Osteen’s comments come just a few months after Acadia signed a definitive agreement to purchase Adventist Health Vallejo, a 61-bed behavioral health hospital in California.

Roseville, California-based Adventist Health is a nonprofit that provides care through hospitals, clinics, home-based care agencies, hospices and JV retirement centers in more than 80 communities across the West Coast and Hawaii.

Before Acadia can expand with Adventist or Ascension, the behavioral health provider has work to do, Osteen said.

“We have to prove ourselves,” she said. “We have to make the one work. But as we do that, we have opened I think more markets and more possibilities to expand the partnerships.”

On the call, Osteen also dug into Acadia’s overall JV strategy, which it ramped up over the past couple of years. Unlike de novos, JV partnerships allow the company to leverage an already strong provider in a given market, she explained.

“These are important health systems,” Osteen said. “They have, many times, more than one facility. … We can take advantage of their presence in the market. The ramp up is quicker. And frankly, we’re able to leverage their payer rates in most cases.”

She also highlighted the staffing and referral benefits of JV relationships, as well as the perks of having an already established market presence.

JV opportunities are just one piece of Acadia’s volume growth plan for the years ahead. It also plans to add 300 beds to its existing facilities in the year ahead and has identified around 100 markets in the U.S. with potential de novo opportunities, according to CFO David Duckworth, who also touted the company’s strong rate growth and margin improvement on the call as means to help achieve the targeted 10% EBITDA growth over the next five years.

Finally, Acadia leaders also shared some color on the company’s incremental growth goals related to mergers and acquisitions.

“The pipeline is very strong, and it’s really strong for the tuck-ins,” Osteen said. “We do think that we will have opportunity in not just the smaller [deals], but perhaps some of the platforms that may come to market. We have good visibility around those.”

Osteen added that Acadia is more focused on deals in the acute, CTC and specialty spaces than on RTC. Additionally, the company is open to deals in new geographies, she said. Whatever the case, though, the deal would have to make sense financially and strategically.

As far as telehealth goes, she predicted that it’s here to stay as an extension of Acadia’s services, rather than a replacement. In what context, though, depends on reimbursements and regulations from the Centers for Medicare & Medicaid Services (CMS) and other payers.

“From what I’ve seen so far from the administration, they’re focused on making sure that mental health is front and center [and] enforcing parity,” Osteen said.

Companies featured in this article:

, ,