Acadia, US HealthVest Seeing ‘Tremendous’ Strategic Benefits from Joint Venture Partnerships

Traditional nonprofit health systems have seen an enormous uptick in behavioral health patients. In turn, they are struggling to keep up with the demand.

At the same time, many behavioral health providers are looking to grow their geographical footprint. As a result, health systems and behavioral health providers are eying more joint venture partnerships than ever before.

These deals give for-profit behavioral health providers brand recognition and a referral stream, while health systems get a new option to care for their patients’ psychiatric needs.


“The demand for behavioral health services has skyrocketed. The supply of available beds is limited. And health systems’ core business isn’t necessarily behavioral health,” William Teague, a director at VMG Health, told Behavioral Health Business. “So health systems are looking for a solution to increase supply, get someone with expertise in caring for these patients, and decompress their hospitals and ERs.”

VMG Health is a Dallas, Texas-based health care strategy and transaction advisory firm.

Behavioral health JVs have been steadily on the rise since 2019. In fact, the first few quarters of 2022 alone saw more JV activity than either of the previous two years, according to a VMG Health and Ponder & Co presentation.


That trend has continued in 2023.

Why JVs make sense for behavioral health operators

Some of the largest names in behavioral health, including Acadia Healthcare (Nasdaq: ACHC), Universal Health Services (NYSE: UHS) and LifePoint, are doubling down on their JV strategies.

Acaida’s leadership team has been vocal about the company’s JV push this year, specifically as a way to enter more challenging markets. It has announced agreements with 20 JV partners since 2015, with a couple examples including Tufts Medicine and SolutionHealth.

On Monday, it announced its most recent JV: a partnership with Nebraska Methodist Health System to build a 96-bed behavioral health hospital.

“We have seen tremendous benefits in these joint ventures. The combination of our partners’ local market presence and medical capabilities along with our clinical and operating expertise gives these efforts a running start,” Isa Diaz, senior vice president of strategic affairs for Acadia Healthcare, told BHB in an email. “Our partners’ reputations bring instant credibility to these efforts, and we are able to quickly build upon their existing behavioral healthcare services.”

Acadia is the largest pure-play behavioral health care provider in the U.S. It operated 250 facilities with about 11,000 beds in 39 states and Puerto Rico at the end of 2022.

The provider has also touted JVs as a way to help enter new markets and navigate the local regulatory landscape.

“Our partners know their local markets well, which is helpful throughout the regulatory process. They have long-standing relationships in their communities and a strong reputation that residents trust,” Diaz said. “Acadia’s experience, resources and structure make us agile in meeting the partners’ systemwide needs.”

While it’s not impossible for behavioral health providers in certificate of need (CON) states to be approved for a new facility, having a JV partner that has already gone through that process is helpful.

“Every process is different,” Teague said. “Having someone that’s done it before, knows the ropes, and knows the folks involved, is generally helpful.”

JVs also give behavioral health operators access to more integrated health services and a more streamlined referral pathway.

“We see a lot of benefits because we get that medical support that a med-surg hospital provides,” Richard Kresch, president and CEO at US HealthVest, told BHB. “It also [supports] referral flow. In our JVs, we often work in the EDs of our partner hospitals. So we are managing psych services, not only on the inpatient side but also the assessment and triage side.”

US HealthVest is an investor that helps develop psychiatric hospitals. In 2022, it inked a JV deal with OSF HealthCare System to build the largest inpatient psychiatric hospital in Illinois, just south of Chicago.

BayState Health and South Shore Health System Inc are among US HealthVest’s other behavioral health JVs.

Why health systems are opting for JVs

But it isn’t just behavioral health providers benefitting from the JV agreements. Many health systems focus on the med-surg side of care, and behavioral health services aren’t their expertise.

Having a JV partnership can help free up beds for more profitable service lines and have an alternative option for patient referrals.

“Hospitals’ financial performance, generally speaking, has been tough in 2022 and 2023. These behavioral health service lines are often unprofitable for the hospital,” Teague said. “Many facilities are aging … This JV model can give them an out and hopefully cure some of those problems. If they build a new 90- or 100-bed hospital, that will increase capacity, and it’s usually off campus. So there’s a way to help decompress your emergency room.”

JVs can also help traditional health systems with behavioral health staffing shortages. Teague noted that many for-profit behavioral health operators have national networks enabling them to recruit staff more easily.

“Then it’s a source of capital if [the for-profit] is publicly traded or has access to debt markets,” Teague said. “The hospital can service these patients off balance sheet, if you will, by accessing the capital from their partner.”

Navigating challenges

While health systems and behavioral health operators are eager to jump into JV partnerships, there can be challenges. One of the most evident is cultural differences between the organizations.

Some small for-profit behavioral health operators have very little bureaucracy and have traditionally been able to move fast. In comparison, some of the large health systems have many layers of decision-making oversight.

“It’s [important to] understand how each side works and accept working within that framework,” Kresch said. “Our joint venture projects have generally taken a lot longer than the ones we do when we are the sole operator. But that’s just part of the process.”

The other potential challenge JV partners face is negotiating responsibilities, such as who is providing pharmacy services and employing physicians, Teague said. Health systems, generally the minority partner in a JV, also have to accept losing some control.

While JV announcements have been plentiful in the last few years, many of these projects have yet to open. Time will tell what challenges these ventures face and how the partners will address them.

“Most of these announcements you’ve seen have happened over the last three years. A lot of these facilities aren’t online yet,” Teague said. “I think the big challenge for them is, ‘Hey, I built a new 150-bed hospital. Am I able to find folks to staff it?’ … It’s incremental beds to a market. You need an incremental staff to staff up. I think that’s a challenge for sure.”

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