American Addiction Centers will examine outcomes as growth plan continues

American Addiction Centers (AAC) used the occasion of the release of its first quarterly earnings report as a public company to articulate an aggressive vision for growth and to emphasize the launch of a major initiative in outcome evaluation.

During a Nov. 6 conference call held the day after release of AAC's results for the third quarter ended Sept. 30, 2014, AAC chairman and CEO Michael Cartwright said he envisions building a company with around a dozen attractive residential properties and 30 to 40 outpatient centers, with a presence in every major market in the country. Cartwright added that AAC has entered into an agreement with Nashville-based Centerstone Research Institute to conduct four three-year studies that will evaluate AAC's clinical approach.

Cartwright explained that the aim of these studies involves making the case to payers that significant lengths of stay enhance patients' long-term wellness. “We wanted to make sure a third party could come in,” Cartwright said of the agreement with Centerstone Research Institute. “Over and over, the best predictor of outcome is length of stay,” he said. “We know that's a fact in the treatment industry.”

AAC's third-quarter numbers illustrate improved revenues and admissions activity consistent with the Brentwood, Tenn.-based company's ongoing growth strategy. Revenue in the quarter was $36.6 million, up 29% from the same period in 2013. Client admissions increased to 1,275, up 36% from a year ago, and average daily census was 413, up 30% from a year earlier. The Oct. 7 closing of the company's initial public offering resulted in $55.1 million of cash at the Sept. 30 close of the third quarter, AAC reported.

Cartwright attributed much of the upward trend in patient numbers to the recently completed 60-bed, $6.2 million expansion of AAC's Greenhouse facility in Dallas; that center now has 130 beds. The next significant increase in residential bed capacity for AAC is expected to occur in the second half of 2015, with completion of a 164-bed facility in Tampa, Fla.

But Cartwright added that the company will continue to look for the right opportunities to expand capacity at its existing facilities and possibly to acquire other centers as well. It also is growing its outpatient capacity, such as with a $2.6 million Las Vegas facility that will complement its existing Desert Hope residential center there. AAC currently operates a total of six treatment facilities nationally.

Reaction to CRC deal

During the earnings conference call, Cartwright was asked about his reaction to last month's announcement that Acadia Healthcare will purchase addiction treatment giant CRC Health Group for $1.18 billion. Cartwright complimented CRC's work in the field and said it and AAC share some similarities, but he added that the Acadia-CRC deal would have no impact on how AAC maps out its growth.

“The CRC deal is great,” he said, adding, “It legitimizes the addiction industry to the larger healthcare sector.” Yet he added, “I don't think it impacts our business at all.” He reiterated AAC's interest in growing its outpatient services and in further diversifying into both insurance network and self-pay business.