Acadia Healthcare Co. Inc. (Nasdaq: ACHC) faces another round of scrutiny regarding its oversight of its facilities.
On Sunday, The New York Times published a report that highlighted several questionable and potentially dangerous practices at some of Acadia’s psychiatric hospitals, with NYT citing interviews with dozens of current and former Acadia Healthcare employees and patients.
The report examines alleged instances of inappropriate behavior and misdeeds, spanning about five years and principally focusing on four hospitals in Florida, Georgia and Missouri.
Earlier in the summer, Acadia Healthcare found itself among a handful of behavioral health operators mentioned in a Senate Finance Committee report about the management of residential treatment centers.
Acadia Healthcare is the largest pure-play behavioral health organization in the U.S. It generated about $2.92 billion in 2023.
In The New York Times report, Acadia Healthcare is said to have routinely held patients longer than was necessary and often against their will at certain facilities. The report also claims Acadia would trump up patient symptoms in reports to payers to extract more reimbursement.
An Acadia spokesperson in an email to BHB called the assertions from NYT inaccurate.
“Decisions on patient care, including how long treatment may be necessary, are never business decisions made by [Acadia],” the spokesperson said. “They are medical decisions made by licensed physicians and care clinicians in accredited, regulated health care facilities based on medical necessity and associated legal requirements.”
Fifty-four of Acadia Healthcare’s 253 facilities were psychiatric hospitals as of last year’s end, according to 2023 financial filings. The psychiatric hospitals accounted for $1.49 billion — a little more than half — of Acadia’s annual revenue last year.
While the NYT article focused on practices that led to real-world impacts on patients, it doesn’t address the wider, more fraught landscape of American psychiatric hospitals. This includes lax enforcement of parity laws, which require health plans to treat behavioral health-related claims on par with behavioral health claims.
“Interestingly, given [The Times’] typical hostile coverage of the managed care industry, the article paints the payers as passive bystanders, ignoring addressing the typically robust utilization management protocols that MCOs have in place to manage length of stay,” a research note from Stephens Inc. states. “The article also does not address that most of the court cases referenced in it were previously dismissed.”
The note also state that “headline risk” is one of the investment risks of behavioral health. Because of the “unique nature of the patient base,” legal and regulatory scrutiny is often amplified.
Psychiatric hospitals in the U.S. have been forced into dire straits by a mishmash of regulatory and payer trends.
The deinstitutionalization movement launched under the Kennedy administration largely failed to achieve its objective of placing psychiatric care in easily accessible, community-based settings, leading to shortfalls in the number of needed psychiatric beds in most communities. This is especially true for pediatric psych beds. Now, states are investing billions to get caught up on decades of underinvestment.
Private for-profits, private nonprofits and local governments have filled the void of deinstitutionalization. Because private and public payers often fail to match reimbursement to the cost of providing psychiatric care, only the most committed organizations maintain psychiatric hospitals or sub-operating units. In 2023, Behavioral Health Business documented a streak of facility closures that illustrate these challenges.
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