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Q3 earnings roundup

November 8, 2016
by Julie Miller, Editor in Chief
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Acadia Healthcare Company

Acadia reported revenue for the quarter was $734.7 million, an increase of 53.1% from $479.7 million for the third quarter of 2015. The company had approximately 17,900 beds at September 30, 2016, including approximately 7,300 beds gained through acquisitions this year.

Most notably, on October 18, 2016, the company sold 21 existing behavioral health facilities and one de novo property with approximately 1,000 beds in the U.K. The move was not unexpected.  The sale was necessary to address a U.K. authority’s concerns about the market impact of Acadia’s Q1 acquisition of Priory Group.  In the company’s Q2 earnings call, Chairman and CEO Joey Jacobs discussed the plan to divest some of its properties as a result of the authority’s investigation.

Also on the Q3 earnings call, Jacobs said the company has two letters of intent for possible joint ventures.

“2018 could be banner year for joint venture de novo beds,” he said.

American Addiction Centers (AAC)

In Q3, AAC client admissions increased 65% to 3,258, and average daily residential census increased 52% to 853. Revenues also increased 23% to $70.5 million in Q3, according to the earnings report. Average daily residential revenue was $768, which represents a 21% drop from 2015 numbers for Q3.

On the day the earnings report was released, stock performance dipped by 50%. Some observers believe there is pressure on revenue numbers from lab services, which AAC earlier this year had indicated might happen.

“The lab is not deteriorating so much that it’s causing major calamity in our company,” Chairman and CEO Michael Cartwright said on the earnings call. “That’s not the case whatsoever.”

He also said that the quarter did not meet the company’s expectations, however, it is working on several fronts to ramp up opportunities, such as gaining third party lab revenue and increasing capacity with new beds. He also explained that the relatively new 93-bed Laguna Treatment Hospital, in Aliso Viejo, Calif., was awaiting Joint Commission accreditation before it could ramp up admissions.

AAC aims to add 300 beds in 2017.

AAC also announced in October that it had settled a legal matter in California, but Cartwright said it was time to put the matter behind them. As part of the settlement, AAC will maintain compliance, internal audit and quality review programs in California. AAC paid the state approximately $550,000 for costs related to the legal proceedings and $200,000 as a civil monetary penalty.

Universal Health Services, Inc. (UHS)

UHS reported net revenues increased 8.2% to $2.41 billion during the third quarter of 2016 as compared to $2.23 billion during Q3 2015.

For its behavioral healthcare facilities on a same facility basis, adjusted admissions increased 1.3%. On a same facility basis, net revenues increased 2.7% during Q3 of 2016, as compared to Q3 of 2015.   

Steve Filton, chief financial officer, commented on the earnings call that UHS has been talking about “muted volumes in the behavioral business for about a year now, largely driven by staffing shortages, shortages of psychiatrists and nurses.”

Filton said there are about six markets where staffing shortages translate into having to turn away patients, but he believes the situation is temporary.

“As we hire nurses, they have to give notice at their old jobs if they are coming from another employer,” he said. “Then they join us, and they go through an orientation or a training. And so we are paying them and we're incurring costs, but we are not necessarily able to increase volumes immediately.”

 

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