Growth trend continued in Q4 of 2015

Acadia Healthcare

Acadia Healthcare's revenue for the fourth quarter of 2015 increased 68% to $495.3 million, up from $294.9 million in the fourth quarter of 2014, according to company officials on the Q4 earnings call.

During the fourth quarter of 2015, Acadia completed five acquisitions with approximately 200 beds and 19 comprehensive treatment centers. Total 2015 deals amounted to 17 acquisitions with approximately 3,450 beds. Acadia ended 2015 with more than 9,900 beds in 258 facilities in its portfolio, said Chairman and CEO Joey Jacobs during the call.

Already in 2016, it has completed the acquisition of the Priory Group in the United Kingdom, which adds approximately 7,100 behavioral healthcare beds in 327 facilities. Priory is a flagship clinic in southwest London, which is best known for its celebrity clientele. Jacobs said Priory's annual revenue of more than $850 million represents a step toward reaching annual revenue of $3 billion for the organization overall.

Combined with Acadia's existing properties, there now are 381 inpatient facilities with approximately 9,300 beds in its U.K. portfolio.

“We have not been, any time, looking at other countries,” said Jacobs. “We have plenty to take care of in the U.K. and U.S.”

Brent Turner, president, indicated that valuations are coming down in the U.S. market, and there are still a lot of one-off deals.

“For the remainder of the year, I see very little acquisition activity in the U.K., but I do see acquisition activity, one-off transactions here in the U.S., which would be in our core spot,” he said on the call. “We are in the beginning stages of discussions with larger transactions that probably would occur in 2017.”

American Addiction Centers

According to American Addiction Centers Holdings (AAC), its revenue for the fourth quarter of 2015 was $58.3 million, a 57% increase from the fourth quarter of 2014 and a 2% increase from the previous quarter. The increase in revenue was primarily the result of increased census and greater outpatient visits, officials said on an earnings call.

Ancillary revenue, which includes drug testing, lab revenue and professional services, was 22% of total client related revenue for Q4, compared with 26% in the third quarter of 2015. There is an expectation of lower testing and lab reimbursements in the future, and AAC officials expect a decrease to a percentage in the mid-to-high teens.

Residential client admissions totaled 2,462 in Q4, a 93% increase from a year ago, and average daily residential census was 670, up 60% from a year ago.

AAC’s total residential bed capacity reached 897, and according to officials, about 19% of the beds in the portfolio are in-network.

Average daily residential revenue was $840 for Q4, down from $966 a year ago and down from $973 in the third quarter. According to AAC, the decrease in average daily residential revenue was driven by lower revenue for drug testing and lower average daily rates from acquired facilities.

Now in the pipeline, a chemical dependency rehabilitation hospital near Laguna Beach, Calif., is set to open in the second quarter of 2016 with 93 beds, pending final licensure. A new in-network laboratory outside of New Orleans should be completed in the third quarter of this year, adding to the existing Brentwood, Tenn., lab and Louisiana-based Townsend lab, which was a 2015 acquisition.

Universal Health Services and Acadia expanded in the substance abuse market over the past year with significant acquisitions, providing potential competition for AAC.

“There are 15,000 different standalone providers out there, that all of us could spend the next three to five years aggregating this space,” said Cartwright on the call. “And I think we’ll have plenty to do.”

Universal Health Services

Universal Health Services (UHS) reported net income of $173.7 million during the fourth quarter of 2015 as compared to $172.8 million during Q4 of 2014.  Reported net income for the full year was $680.5 million, and net revenues increased 10.2%. 

During Q4, behavioral healthcare facilities (on a same facility basis) saw adjusted admissions increase 0.2%, while adjusted patient days increased 0.7% compared to the fourth quarter of 2014. On a same facility basis, behavioral health net revenues increased 3.6% during Q4.

For the full year 2015, behavioral healthcare facilities (on a same facility basis) saw net revenues increased 5.0% compared to 2014, and the operating margins remained unchanged at 27.9%.

According to Steve Filton, chief financial officer of UHS, on an earnings call, acute-hospital revenue growth is expected to be about 6% in 2016, while behavioral health is looking at 5% growth on a same facility basis, attributed more to volume than prices.

“We expect margins to increase slightly if we can increase those revenue growth levels,” Filton said.

UHS ended the year with 208 behavioral health facilities in its portfolio, up from 203 at the end 2014. Total 2015 adjusted admissions were 447,007, a 4.8% increase over the previous year.

Filton also said UHS leaders are anticipating the IMD exclusion will be partially or fully lifted in the near future.

“We believe that will occur, and when it does, that will provide the opportunity for another step up in behavioral health volumes that we likely expect to see not so much in ’16 but in ’17 and thereafter,” he said.