Two organizations are joining the Centerstone portfolio: Prairie Center and WellSpring Resources, located in Illinois. With the addition, Centerstone of Illinois will have 700 employees around the state, providing services to nearly 18,000 people annually.
Once the deal completes regulatory approvals, Prairie Center and WellSpring will be branded with the Centerstone of Illinois name.
Organization officials say the centers’ locations—in growth areas such as Champaign, Ill.—were a large part of what made the deal attractive. Like Centerstone, Prairie Center and WellSpring also have managed care contracts.
“Down south there’s not as much managed care activity right now, but when you look at the geographical footprint this creates, there is an opportunity for growth and to provide services across a larger geographical area that will be more attractive to managed care organizations (MCOs),” John Markley, CEO of Centerstone Illinois, tells Behavioral Healthcare.
Illinois shifted about 1.4 million of its Medicaid recipients into managed care as of January 1, and Markley notes about 74 percent of the individuals in the Champaign area are covered by MCOs.
“It seems like there are opportunities there—untapped opportunities,” he says.
As far as the service mix, Markley says residential and outpatient SUD services currently comprise about one-third of Centerstone Illinois’ mix. Prairie Center, which is a $4.7 million agency, provides only SUD, and WellSpring, at $11 million to $12 million, is heavily focused on mental health including residential services.
The deal also brings additional connections for treating the re-entry population through existing agreements. The Prairie Center has a contract with the Federal Bureau of Prisons to provide halfway house services for federal inmates.
Markley says the scale gained with the Prairie Center and WellSpring addition will bring greater opportunity for input on state policy as well. Illinois is currently facing steep budget cuts that could severely impact behavioral health services, especially those delivered through Medicaid. Governor Bruce Rauner is looking to reduce state spending by $6.2 billion.
“As we are able to speak from a larger base and talk about those things, I think we are taken more seriously and have more clout,” Markley says.
David Guth, CEO of Centerstone, also says there are many states struggling to balance their budgets, so an organization that can leverage its size will be in a good position to help the state draw additional federal dollars for program support. He hopes the state legislature can meet them halfway, reducing the current proposed budget cuts in light of the needs of the communities they serve.
“In the managed care arena we’re involved in now, the expertise that Centerstone has can bring greater impact and greater leverage to the table within contracting and negotiations with the three organizations being one,” Bruce Suardini, CEO of Prairie Center, tells Behavioral Healthcare. “And the state is looking for synergies of organizations coming together, as there is at the state level, a merger of mental health and substance abuse.”
Guth says the most attractive organizations for merger and acquisition deals are those that have solid leadership, talent and clinical expertise.
“We found over the years that we are better served with organizations with a unique set of program skills because that gives us the ability to replicate best practices,” Guth says.
For future deals, the focus will continue to be on centers in states where Centerstone already has a foothold, such as Illinois, which has been an ongoing priority, he says. He anticipates announcing more deals in time and has begun conversations about potential deals in a variety of locations.
Under the proposed agreement, Markley would continue to serve as CEO of Centerstone of Illinois. Suardini would serve as vice president for the East Region, and Jennifer Craig, Interim CEO of WellSpring Resources, would serve as the organization’s chief operating officer.
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