LifeStance Health (Nasdaq: LFST) is overhauling its facilities with a new operating model — one that it hopes will strengthen its position ahead of what executives expect to be a rocky 2025.

The outpatient mental health giant’s executives project that federal reimbursement rate cuts will challenge the company’s financial progress. LifeStance is banking on momentum from the year’s operational changes will help the company weather those headwinds. But for the time being, LifeStance’s very near-term future is rosy.

“We acknowledge that 2025 will be a particularly challenging year due to … rate dynamics,” Kenneth Burdick, Lifestance CEO, said on the company’s Q3 2024 earnings call. “2024 is shaping up to be a year of very strong margin expansion.”

In line with strong third-quarter financial performance, Lifestance raised its full-year guidance for all financial metrics. It raised its revenue expectations to $1.248 billion, an increase of $20 million.

In 2025, the company will continue to face downward pressure in total revenue per visit and be forced to cope with the Centers for Medicare & Medicaid Services’ (CMS) proposed rate cut. Still, Lifestance anticipates that it will offset these challenges by improving reimbursement with other payers and plans to exit 2025 with double-digit margins.

Lifestance also plans to cope with emerging rate struggles with its new clinical operating model. It will standardize the company’s more than 550 centers spread across 33 states by instituting consistent staffing and processes.

“The model is improving the support that we provide our clinicians, both in terms of increased administrative support and increased clinical leadership support,” David Bourdon, chief financial officer of Lifestance, said on the call. “While I would never say we’re done, [and] we actually still have more to do towards the back half of this year and certainly into next year, we’re going to be creating an even more positive environment within which our clinicians perform their valuable services.”

The operating model required increased hiring, Bourdon said, and LifeStance added 285 net new clinicians to its staff in Q3, bringing its clinical workforce to approximately 7,300.

Scottsdale, Arizona-based Lifestance saw revenue grow year over year, though revenue remained flat sequentially in the third quarter. The hybrid mental health provider hauled in $312.7 million in Q3 revenue, a 19% increase compared to the previous year. Revenue only increased 0.13% compared to the second quarter of 2024.

The company’s absolute profitability continued to improve. LifeStance’s net loss shrank by 90% in the third quarter to about $6 million, and its losses have diminished in nine out of the last 10 quarters. On an adjusted basis, earnings more than doubled from $14.6 million in the third quarter of 2023 to $30.7 million in the third quarter of this year.

Lifestance has previously stated that it was tempering its geographic growth. In 2024, that growth was even more measured than expected. 

The company originally forecast that it would open no more than 20 de novo facilities. In its Q2 2024 earnings call, Bourdon said the company lowered that figure to no more than 10. 

The provider is now on track to have opened only six de novo facilities by the end of 2024, a shortage of five to 10 locations, but plans to open them early in the new year. The delays were caused by the timings of approval processes and construction, according to Bourdon. Opening these facilities in 2025 will make next year one of “substantially higher de novo openings,” though not when compared to the company’s once-fervid geographic expansion.

“We’re not going back to the old days of building like 100 de novos next year,” Bourdon said.

In total, the provider currently plans to open roughly 25 to 30 total de novo facilities in 2025. It still plans to become more acquisitive in 2026, aligning with guidance from its Q2 earnings call.