Acadia Healthcare Co. Inc. (Nasdaq: ACHC) is now more likely to shutter underperforming facilities than in the past.

The Franklin, Tennessee-based behavioral health operator has closed five facilities in the last month, CEO Chris Hunter said on Acadia Healthcare’s second-quarter earnings call. It closed two in the previous quarter.

“If we’re seeing facilities that are underperforming and don’t see a path to improvement, we’re going to take action,” Hunter said on the call. “This is normal portfolio optimization, and we’ll continue to monitor it going forward.”

He added that the company has closed more facilities than “typical over the last few quarters.”

Hunter, who became CEO in 2022, has set a goal for Acadia Healthcare to double its revenue by 2028. The closed facilities presented a $12 million to $15 million “revenue drag” on the company’s topline. The company now operates 258 facilities.

The closures are somewhat offset by Acadia’s continued growth. It has a five-pronged approach to growth that prioritizes joint ventures with health systems, de novo expansion and adding new beds to existing facilities. It includes but de-prioritizes M&A.

On the call, Hunter said Acadia’s existing facility bed expansions are “one of our best uses of capital.” Of the 1,200 beds the company has planned to open by the end of the year, 400 are at existing facilities. While Hunter said the company is on track, Acadia Healthcare has so far, in 2024, opened 64 new beds at existing facilities — 37 of which were added in the second quarter.

The company opened Agave Ridge Behavioral Hospital in Mesa, Arizona, a 100-bed all-ages inpatient facility, in April. Acadia Healthcare plans to open four more inpatient facilities before the year’s end. Two of those facilities will be developed via joint ventures. Acadia has 21 joint venture partnerships for 22 hospitals. Eleven hospitals are presently operational.

Facility growth is translating to growth in the company’s finances. Revenue continues to increase while profits bounce around on an absolute basis. In the second quarter, Acadia Healthcare continues to get paid more to see its patients while seeing more patients, a trend that now spans several quarters. Revenue in the second quarter, in comparison to the same period in 2023, increased about 9% year-over-year to $796 million on a 5.6% increase in revenue per patient day and a 2.6% increase in overall patient days.

Annual quarterly revenue increases averaged about 12.5% from the start of 2022 to the end of 2023. Revenue increased by about 9% in the first quarter of 2024, like it did in the second quarter. While lower, this rate of revenue increase is still higher than in pre-COVID times. Net income increased by about 10% to $80.8 million. In the first quarter, net income increased 18% to $78.8 million. On an adjusted basis, EBITDA totaled $187.6 million ($0.86 per share), an increase of 7.6%.

Hunter attributed the continued earnings growth to a stable job market and the impact of Acadia Healthcare’s internal workforce improvement efforts.

Staffing played at least some part in the company’s decision to close the facilities mentioned above. For one facility, Hunter said, Acadia Healthcare couldn’t find staff qualified to run a wilderness program in Western North Carolina. Such programs have long since fallen out of vogue in the industry and are the subject of searing scrutiny by an ever increasing number of people.

Wilderness programs are a subset of the larger at-risk youth segment within behavioral health. The at-risk youth segment has long been plagued by horrific incidents of abuse, which are magnified in public discourse because the victims are vulnerable children. Powerful Democrats in Congress have seized on the historic misdeeds of the industry and put it and specific companies in the space — including Acadia Healthcare — in the spotlight in an excoriating report and hearing in the U.S. Senate.

Behavioral health advocates found the move to be all bark and no bite. Several pointed out that the report was not tied to a specific legislative effort to improve the sector, nor did the report and hearing address the root causes of the abuses.

Hunter downplayed the impact of the report and hearing, echoing a similar sentiment to its publicly traded peer, Universal Health Services (NYSE: UHS).

“We just haven’t seen any real impact from the Senate hearing in the report,” Hunter said. “We believe that the people that deal with this patient population every day — and that certainly includes our referral sources as well as the various regulatory oversight bodies that are routinely in these facilities — understand that this is just a really difficult population.

“I think they also understand that our facilities are providing high-quality care to this population, and we demonstrate that routinely with the outcomes that we’re able to achieve.”

He also said that residential treatment centers, one of the specific care settings under examination by federal lawmakers, are only a small part of Acadia Healthcare’s business. In 2023, about 11% of the company’s revenue came from residential treatment centers.

Still, child abuse at an at-risk youth facility cost Acaida Healthcare dearly, financially speaking. In July 2023, a jury ruled against Acadia Healthcare in a civil lawsuit involving sexual abuse of a minor at a now-defunct facility that totaled $405 million. In October 2023, Acadia agreed to pay $400 million to settle three cases related to abuse at the facility. That translated to a huge hit to Acadia’s 2023 profitability, leading to a $216 million loss in the third quarter of 2023.