Throughout 2021, Acadia Healthcare (Nasdaq: ACHC) made good on goals it laid out to expand its services through joint ventures (JVs). With a new year underway, Acadia – which is the nation’s largest pure-play behavioral health provider – remains bullish on that strategy as far as driving future growth.
According to CEO Debbie Osteen, JVs have distinct advantages over acquisitions when it comes to the company’s expansion goals.
“Acadia benefits because we gain market access to attractive geographies otherwise inaccessible through acquisition,” Osteen explained to participants Wednesday at the 40th annual J.P. Morgan Health Care Conference, which was held virtually.
In addition to the attractive locations, Acadia typically benefits from the established relationships with payors when they enter into these types of agreements.
“We also are able to partner with a system that has an established reputation and a strong market presence,” Osteen added. “We, by partnering, expedite our ramp-up.”
Acadia last year announced seven JV partnerships, which were a significant part of the provider’s growth plans following the sale of its United Kingdom operations for $1.47 billion. Among the health care systems that Acadia in 2021 announced JVs with were Lutheran Health Network of Indiana, Geisinger Health System, Bronson Healthcare, Scripps Health and Orlando Health.
Acadia is looking to continue that activity with two planned JVs scheduled to open this year, as well as four to five JVs each slated to begin operating in 2023 and 2024.
The first of those two JVs scheduled to open some time this year is East Tennessee Behavioral Hospital, a 90-bed hospital located in Knoxville that will be operated in partnership with Covenant Health. Acadia’s other planned 2022 JV opening – which was announced last year – is for a behavioral health hospital in Fort Wayne, Indiana that will be co-operated with Lutheran Health Network.
Between 400 to 600 new beds will be provided at Acadia’s new JVs scheduled to open in 2023. Acadia currently has 16 JVs across the country that are in various stages of development, according to the presentation.
Osteen cited the increased demand nationwide for behavioral health services as a critical factor of Acadia’s growth-by-JV strategy. Osteen also said that various prospective partners have been attracted to the possibility of Acadia – with its size and capital – helping them scale up their own capacity to provide psychiatric services, particularly when they might not have the resources to adequately do so on their own.
“Some have a lack of expertise in the service line, or a lack of capital to replace or upgrade existing, aging facilities,” she said. “They also want to fill current and anticipated gaps in their services for behavioral health treatment in the market.”
Overall, Acadia is looking to expand their presence in the market by a five-pronged approach, which in addition to JVs include acquisitions, de novos, facility expansions and an extension of its care continuum with offerings such as telehealth.
Osteen previously touched upon some of the company’s consolidation market strategy in its third quarter earnings call last October and reiterated some of those points Wednesday.
“We have a very strong balance sheet,” Osteen told conference attendees. “We also have a disciplined capital allocation framework, and that supports our market leading growth.”
Osteen’s appearance at this year’s J.P Morgan Health Conference is due to be her last, as she is scheduled to retire from her CEO post at the end of this month.
Osteen will continue to serve on Acadia’s board of directors and will assist in the selection of her replacement.