How Acadia Healthcare Uses JVs to Enter Hard-to-Access Markets

Joint ventures are leading behavioral health provider Acadia Healthcare’s (Nasdaq: ACHC) growth strategy.

On Tuesday at the BofA Securities 2023 Healthcare Conference, Acadia CEO Christopher Hunter revealed that roughly 50% of his company’s projected 670-bed additions this year are in the acute care setting, with the bulk of those additions driven by joint ventures.

JVs are expected to be even more crucial as the company plans to expand by 1,150 beds in 2024 and in 2025.


“That is a great opportunity for us — with [a JV partner] that has a brand name, that is well known, that can bring not only volume but also has patients that they can bring over, that has these payer relationships,” Hunter said. “There are just so many advantages to doing that.”

Hunter noted that the company has signed 18 JVs for 19 different facilities. These JVs include partnerships with Henry Ford, Geisinger and Tufts.

David Duckworth, Acadia’s CFO, said the company sees JVs as a way to enter more challenging markets.


“We do take a granular view of each market, and in some cases, our joint venture opportunities can open up a market that we don’t believe we would even be able to access through a de novo — where a state may have a certification of need or moratorium on bed additions,” Duckworth said. “Yet, we have a provider in that market that is looking for us to come in and build a new facility with them through a joint venture, bring in an additional level of expertise and even increase their behavioral offering in that market.”

The company uses both a proactive and reactive approach to JV opportunities.

It has screened all market service areas (MSAs) in the country and evaluated if a de novo, M&A or joint venture expansion makes sense for the business. This has allowed the company to reach out to potential partners in those markets.

Additionally, it receives several inbound calls from health systems looking to add more behavioral health expertise to its arsenal.

“We have those discussions and evaluate it from our perspective, and have our own criteria that we follow as we evaluate that, but [we] still see just a very strong pipeline of both proactive deals as well as inbound,” Duckworth said.

Joint ventures are one of the five growth pillars Acadia has touted as part of its growth plan. The others include M&A, de novos, adding comprehensive treatment centers (CTCs) for addiction treatment and facility expansion.

While JVs might be the company’s most popular expansion strategy, Hunter noted that the macroeconomic difficulties have put a lot of pressure on small mom-and-pop behavioral health providers.

This may allow Acadia to be an active M&A player in the next year as well.

“We are a company that has a very strong balance sheet,” Hunter said. “We feel like this is an environment coming up that is going to play to our strengths. We still need to be prudent. We are beneficial in that we have so many different growth levers and ways that we can deploy capital, whether it’s the JVs or the de novo, adding CTC clinics. … We have a high hurdle for M&A, but we think that some really attractive opportunities are coming our way, really across all lines of business.”

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