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Treatment centers post Q2 revenue increases

August 10, 2016
by Julie Miller, Editor in Chief
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The completion of major acquisitions drove double-digit revenue growth in the second quarter for Acadia and American Addiction Centers. Meanwhile, Universal is positioned for a potential industry shift toward an in-network business model.

Acadia Healthcare Company

In the second quarter of 2016, Acadia’s revenue increased to $756.5 million, up 66.8% from Q2 2015. For the first six months of 2016, revenue was $1.4 billion, an increase of 67.6% from $819.4 million for the first six months of 2015.

Joey Jacobs, chairman and CEO, said on the company’s earnings call that the completion of the Priory Group acquisition in the first quarter, which brought Acadia approximately 7,100 beds, helped to produce the growth. Additionally, Acadia intends to sell 19 of its U.K. healthcare facilities with approximately 750 beds based on a competition authority’s concerns about the Priory Group deal. The facilities produced aggregate annual revenues of approximately $132 million.

In total, the company added approximately 8,800 beds and 369 inpatient behavioral healthcare facilities during the past 12 months, including additions to existing facilities and de novo acute inpatient facilities. Most recently, in June, it added two Pennsylvania properties, following a May acquisition of a facility in Tennessee.

“Our acquisition that we made in May here in Tennessee with TrustPoint, within 45 days of acquiring that facility, we had already filed to double the size of the facility,” Jacobs said on the call. “They were turning away enough patients that we believe that we could build another 100 beds there.”

Since the call, Acadia has also announced another deal in West Virginia.

Additionally, officials noted that it’s too early to judge the impact of new IMD exclusion rules in the Medicaid space but should have more to say by the end of Q3.

American Addiction Centers

AAC Holdings, Inc. (AAC) reported second quarter revenues increased to $71.5 million compared with $53.8 million for the same period in the prior year (+33%). Activity included closing on two previously announced acquisitions and launching the development of a 150-bed residential treatment center in Ringwood, N.J.

Officials on the call also noted the opening of the 93-bed Laguna Treatment Hospital in Aliso Viejo, Calif., which is being staffed up to full capacity over time. The center will provide detox services for patients continuing on to other levels of care at AAC facilities or at other treatment centers in the area.

There are 400 beds currently in the pipeline. The company has the capital available to complete the Ringwood center and add beds in other locations over the next two years, with enough remaining to allow for the possibility of smaller acquisitions, CEO Michael Cartwright said on the earnings call.

“We are focusing on de novo,” Cartwright said on the call.

Client admissions increased 60% to 2,890, according to officials, and average daily residential revenue was $801.

Universal Health Services, Inc.

Universal Health Services, Inc. (UHS) reported net income of $185.6 million during the second quarter of 2016 as compared to $182.2 million during Q2 of 2015.  Net revenues increased 6.8% for the quarter and 8.4% for the first half of the year.

During Q2 of 2016, behavioral health facilities (on a same-facility basis) experienced an adjusted admissions decrease of 0.3% compared to Q2 of 2015. At these facilities, net revenues increased 2% during the quarter, and the operating margins were 28.1% and 28.7% during Q2 of 2016 and 2015, respectively.  

UHS facilities have contracts with managed care, and officials said on the company’s quarterly earnings call that when demand increases around a particular health service, such as addiction treatment, the payers start to examine the service more closely. Steve Filton, chief financial officer, noted that UHS acquired Foundations in September last year, bringing both out-of-network and in-network business, which he considers an advantage.

“If this business shifts to more of an in-network model, we think we’ll be prepared to make that transition more easily than a number of these other companies,” he said.

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