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Northeast holds potential for AAC

February 26, 2015
by Julie Miller, Editor in Chief
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With its new capital influx, American Addiction Centers (AAC) has been on a spree, finalizing a variety of expansions over the past few months. In its fourth quarter earnings call, AAC leadership provided some detail on future growth areas.

“We love the Northeast, from Philadelphia all the way up to Boston,” CEO Michael Cartwright said during the call. “There are 50, 60 million people in that region, lots of folks looking for treatment, and now, they go outside. And I think that we can keep them inside that region through outpatient services [and] residential services. I anticipate that we can grow that region in the next 24 to 36 months.”

AAC signed a definitive agreement to acquire Clinical Services of Rhode Island, an outpatient provider with three locations in Rhode Island, in late January and expects to close the deal during the second quarter of 2015.

Additionally in the Northeast, AAC announced on the earnings call the purchase of a facility in Ringwood, N.J., built in 1861, that previously functioned as a convent and sits on 96 acres of property. Renovations and new construction will begin by summer, with a targeted opening of 150 new beds late in 2016. The company projects an aggregate investment of $22.5 million for the property, which it purchased for $6.5 million in cash.

Also for the future, AAC will target possible entry into markets such as Chicago and Phoenix because the locations offer accessible airports and a large local population base. The teams are looking all over the country for opportunities in higher populated areas, company officials said.

Balancing the portfolio

AAC’s call center receives about 20,000 calls per month, and many potential patients ultimately do not move forward on admission to a program because of insurance network issues. Cartwright said AAC has an interest in acquiring more facilities that have in-network status with insurers to balance its in-network and out-of-network portfolio.

Also during the call, the organization announced that it had received licensing for Recovery First in the Fort Lauderdale area, which it recently purchased for $13 million in cash. The Recovery First acquisition was strategic because it adds 56 beds with in-network status to AAC’s lineup.

And company officials believe there is plenty of space in the market for purchases.

“I certainly don’t feel that there [are] so many others out there scouring for opportunity,” said Kirk R. Manz, chief financial officer.

Manz said AAC now has 580 beds and expects utilization in the 85 percent to 90 percent range this year.

In terms of overall financial performance,  AAC revenues in the fourth quarter of 2014 increased to $37.2 million compared with $28.1 million in the fourth quarter of 2013 and $36.6 million in the third quarter of 2014. Client admissions increased 35 percent to 1,276, and average daily census increased 35 percent to 418, compared to the same quarter last year.