Acadia Healthcare Says Public Scrutiny Leading to Lower Volumes, Weaker Financial Projections

Bad news at Acadia Healthcare (Nasdaq: ACHC) has translated into a real financial impact.

The behavioral health behemoth experienced lower patient volume growth than expected in October, which company leadership attributed to bad press in its Q3 earnings call. Acadia expects the negative impact to be temporary, according to Heather Dixon, Acadia’s chief financial officer.

“We do, as I mentioned, expect that the recent news coverage and the news of the investigation has had some moderating effect on that growth, but it’s early days,” Dixon said on Thursday’s call. “We see this as largely temporary and we’ve been working with our partners to identify any specific questions that they have.”

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In September, patient volume growth remained above 5%, but dropped to approximately 3% in October, Dixon said. Acadia therefore revised its 2024 guidance to reflect expected Q4 year-over-year, same facility volume growth of approximately 3% to 4%, which is 200 to 300 basis points below previous expectations.

Lower-than-expected volume growth resulted in a $20 million to $30 million ding in Acadia’s revenue guidance and a $10 to $15 million impact on the company’s EBITDA outlook.

If lower volumes persist, Acadia will reduce facility-level costs accordingly, Dixon said. 

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Addressing the negative publicity that impacted Acadia’s volume growth, CEO Christopher Hunter said that Acadia’s facilities undergo extensive oversight and routine third-party audits. He seemed to attribute negative publicity to general misconceptions about the psychiatric industry.

“We also believe it is important not to perpetuate myths that psychiatric care is ineffective or even harmful,” Hunter said. “At Acadia, clinicians follow industry standard, clinically driven admission and discharge criteria, and we hold ourselves to an incredibly high standard.”

On top of the highly publicized scrutiny regarding Acadia’s patient practices, the provider has also experienced legal tribulations. In September, the U.S. Department of Justice (DOJ) alleged that Acadia falsely billed Medicare, Medicaid and TRICARE for inpatient behavioral health services that were, at times, medically unnecessary. Acadia has also recently received multiple subpoenas and voluntary requests for information.

Some of these demands have been withdrawn, Hunter said on the call. In some cases, Acadia has been allowed to voluntarily produce information rather than undergoing a subpoena.

Acadia has also recently received a subpoena from the SEC, Hunter said, and expects that it will receive more requests for information from federal agencies in the future.

Despite dips in patient volume growth and bad press, Acadia increased its total Q3 revenue to $815.6 million, an 8.7% increase year over year.

Acadia is on track to meet its goals for long-term growth, according to its earnings report, adding five opioid treatment program facilities to its portfolio in Q3 as well as tacking on 15 beds to existing facilities. The company spent $59.2 million to acquire new assets in the first three quarters of 2024.

As of September 30, 2024, Acadia operates 260 behavioral healthcare facilities, including approximately 11,300 beds in 38 states and Puerto Rico.

In addition to de novo growth and acquisitions, Acadia continues its joint venture strategy. The provider has 21 joint venture partnerships for 22 hospitals, 11 of which are already in operation and 11 more expected to open in the coming years.

The recent critical press has not impacted Acadia’s JV pipeline, Hunter said, although he said some “questions” had arisen from JV partners.

“Clearly, there are questions that come up across the board, and I think that’s the case with employees as well,” Hunter said. “But I think we have done a really good job as a company this year, continuing to talk about all the investments that we’re making on the technology front — continuing to work hard on our employee engagement. We’ve actually been very encouraged by our ability to continue to attract and retain talent.”

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