Acadia to Expand Partial Hospitalization, Intensive Outpatient Programs

Acadia Healthcare Co. Inc. (Nasdaq: ACHC) has plans to grow its partial hospitalization programs (PHP) and intensive outpatient programs (IOPs).

Acadia’s preparations to weather the Medicaid redetermination storm have paid off and is now seeking to expand its continuum of care to meet increased needs and drive growth, according to its Q3 earnings call.

The Franklin, Tennessee-based behavioral health company’s third-quarter revenue totaled $750.3 million, a 12.5% year-over-year increase. Notably, same-facility revenue increased by 13% year-over-year, which Acadia attributed to volume and rate improvements.


Analysts from Jefferies, a New York City-based investment banking firm, said that they remained “bullish” on Acadia after hearing Q3 updates, and anticipate positive stock momentum now that the company cleared abuse lawsuits in New Mexico with a $400 million settlement. 

“With the New Mexico legal issue now behind [Acadia], redeterminations appearing to track according to plan/expectations, and labor inflation normalizing in the low-single-digit % range, impediments for the stock to trade at a valuation that corresponds with its low-double-digits to mid-teens EBITDA growth rate are gone, which should allow the stock to see multiple expansion and notable upside from current levels,” the analysts said.

PHPs and IOPs

Acadia reported strong performance in volume across service lines, with most of the volume growth driven by acute specialty and comprehensive treatment centers (CTCs).


It’s looking to expand its PHPs and IOPs to help swell volumes, which Chris Hunter, CEO of Acadia, says will be significant for patient outcomes for three reasons.

“First, the vast majority of our acute and specialty patients are indicated for PHP/IOP as a step-down therapy post-discharge as they transition back to the community,” Hunter said. “Second, PHP/IOP has a strong record of positively affecting post-discharge health outcomes. And lastly, we believe there’s a clinical opportunity for a larger share of our patients to access and appropriately utilize PHP/IOP.”

To achieve its goals, Acadia introduced three new outpatient programs in Q3, bringing the number of outpatient programs added year-to-date to 26.

Growing Acadia’s footprint

IOPs and PHPs aren’t the only growth strategy for the company. Acadia continues to leverage its JV strategy to open more hospitals. 

The company opened two new hospitals with JV partners, one with Bronson Healthcare in Michigan and one with Geisinger in Pennsylvania.

That brings the company’s total number of JV partnerships to 20, with 11 hospitals currently in operation and 10 expected to open in the next few years.

“The pipeline for potential partners remains robust and joint ventures will continue to play an important role in Acadia’s future growth,” Hunter said. “We recently broke ground on a second hospital with an existing JV partner, which we will announce in the next several months. This will be our second partnership with two hospitals in different markets, demonstrating the value of these collaborations to both our partners and to us.”

On top of its joint venture growth, the company expanded existing facilities to include 204 more beds during the first nine months of the year, setting itself up to meet its goal of 300 beds in 2023.

It also opened two new CTCs, both of which offer medication-assisted treatment (MAT) for opioid use disorder, bringing the total of new Acadia CTCs this year to four. It plans to open two additional CTCs in Q4 and remains on track to open two de novo acute inpatient hospitals by year-end.

During Q3, Acadia announced that it would acquire Turning Point Centers, a 76-bed provider of substance use disorder (SUD) treatment and primary mental health treatment in Utah. The deal is expected to close by the end of the year.

Medicaid Redeterminations

Acadia “extensively” prepared for Medicaid redeterminations by working proactively with patients, including installing kiosks in facilities with QR codes and a dedicated support line to aid Medicare patients.

“We’ve had a high success rate of being able to assist our patients, particularly our CTC patients, but also our other lines of business, to retain their coverage,” Hunter said. “In many instances, we’re able to help them get retro coverage where they’ve lost coverage for a period of time as well. I would say a very high majority of our patients who have lost coverage have been able to favorably resolve within 30 days.”

State cooperation aided Acadia’s Medicaid redetermination weatherproofing. Some states informed the company ahead of time when planning to move patients off Medicaid, which Acadia cross-referenced with its patient list to proactively reach out to its patients who are being moved off Medicaid.

“For us, redetermination is primarily applicable to our CTC service line,” Hunter said. “Our patients there are continuing with their treatment, either through the reinstatement of Medicaid, switching to another payer, accessing state-based exchanges and sometimes moving to self-pay.”

With approximately 40% of its patients having completed redetermination, Acadia remains “cautiously optimistic” that impacts from Medicaid redeterminations will remain manageable into 2024.


Acadia has experienced an improvement in labor trends, as wage inflation decreased from 7.5% in Q1 to 5.7% in Q3.  

Attrition rates declined across several clinical positions, which Hunter says he expects to continue into 2024, partly through improved employee engagement.

One of the methods it leveraged to improve employee engagement is an electronic medical record (EMR) system, which it has deployed in around half of its acute facilities. It plans to further deploy the system across specialty facilities and CTCs.

Among the benefits of the system is stronger staff engagement.

“We’ve seen better employee engagement at facilities that have an EMR relative to those that don’t,” Hunter said. “It’s easier to recruit clinicians who have been trained on EMRs who don’t want to work in a paper environment which is consistently the norm in behavioral health. And it helps us on the retention front as well.”

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