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As a public company, AAC encounters more scrutiny

August 24, 2015
by Julie Miller, Editor in Chief
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On August 20, AAC Holdings, Inc. presented an update to stockholders and the public in response to a number of online reports regarding the recent murder indictment against American Addiction Centers (AAC) and five of its employees. As the only public company solely in the addiction space, AAC faces greater scrutiny than a typical treatment center operation.

“Short-sellers have been working overtime to spin out misinformation,” said CEO Michael Cartwright, during the call.

Cartwright highlighted among other things AAC’s commitment to quality care, pointed to statistics demonstrating that AAC experiences fewer patient deaths per discharge than the industry average, and reiterated that AAC is not at fault for the patient death cited in the Riverside County, Calif. indictment. Additionally, he clarified the current role of company executive Jerrod Menz, who was among those charged in the case.

Menz had been AAC’s president and a member of the board of directors until the indictment was announced in late July. According to an AAC press release at that time, Menz “voluntarily stepped down from those roles to address these charges.”

Observers believed Menz had cut ties to AAC entirely, but Cartwright said that is not the case.

“Jerrod Menz has not resigned from the company,” he said. “Although he resigned from his policy making functions, including his role as president and director of the company, he remains very much active in developing business to expand our operations. We anticipate Jerrod will resume his former role once this case is resolved.”

A new website launched last week as well: aacthetruth.com. The site offers industry data from SAMHSA on deaths per discharge and instructions for obtaining the original coroner’s report on the patient death from Riverside County by mail for $23.

Blog: The Least You Need To Know About the AAC Charges

Public company

Being a public company, AAC must be far more transparent than other treatment centers, according to Dexter Braff, MBA, president of the Braff Group. The risk is not so much in revealing day-to-day operations to the competition but rather in the company’s obligation to disclose unique situations such as pending litigation.

“The general notion is that transparency is an issue because everyone knows what you’re doing,” Braff tells Behavioral Healthcare. “Folks think twice about going public because of exactly that.”

AAC’s stock experienced a sharp drop in early August as a result of the indictment surfacing, but it slowly began to regain some ground in the weeks since. After the August 20 update call, the stockholders did not react unfavorably, he says.

“Especially for companies like AAC that see its stock rise dramatically over a short period of time, it is likely when there are stumbles to see it decline fast,” Braff says.

Stock prices could recover over time. As prices rose in the early days of AAC trading, there was novel exuberance in the marketplace, Braff says, and he’s not surprised the news of the indictment took the air out of the high-flying stock. The fact that it’s moving in an upward trend now tells a story, he says.

Treatment center operations

It will be months if not years before the industry knows the ultimate fate of AAC and its employees named in the case. Other treatment providers can potentially learn something from the situation, however.

Fernando Gutierrez, a registered professional guardian and bioethicist in Florida, says that residential treatment centers must consider not just the patients' health status but also the patients' ability to make their own treatment decisions before intake.

Specifically, Gutierrez wonders, based on the reports he’s read, whether the patient identified in the AAC case was healthy enough for air travel to the AAC treatment center in California and whether an advocate or primary care provider would have recommended against it.

“The family or the airline might have culpability,” he says. “That’s an issue that has not been addressed.”

Engaging the patient’s regular care provider—or an independent advocate if the patient has no caregivers—might be part of due diligence before accepting anyone with medical comorbidities.

 “It helps treatment centers reduce liability,” Gutierrez says.

 

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