‘We’re Going to See More Opportunity’: Acadia Gears Up for Promising M&A, JV Landscapes


Mental health operator Acadia Healthcare (Nasdaq: ACHC) has leveraged joint ventures, M&A activity and comprehensive treatment center (CTC) growth to add 600 beds in 2022.

The Franklin, Tennessee-based company is doubling down on its plan to open more CTCs for opioid use disorder treatment, in particular. In the third quarter, Acadia opened two new CTCs. The company is on track to open six CTCs in total in 2022.

“We do have a very strong pipeline of future CTC locations. We still believe there’s a significant need and a very low percentage of people who need treatment that are currently getting treatment,” David Duckworth, Acadia’s CFO, said during a Tuesday Q3 earnings call. “So that is a tailwind that we think will continue to support future CTC de novos. We have a refined and detailed process that we are going through to identify those markets.”

Franklin, Tennessee-based Acadia was founded in 2005. It has inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers, outpatient clinics and therapeutic school-based programs. Acadia has 239 behavioral health facilities with 10,600 beds in 39 states, according to its webpage.

In order to focus on CTC expansion, Acadia has brought on Dr.Nasser Khan as operation group president of its CTC business. Khan, who officially took on the new role on Sept. 6., previously served as senior vice president of operations at specialty pharmacy services company and Walgreens Boots Alliance Inc. (Nasdaq: WBA) subsidiary Shields Health Solutions.

During the earnings call, Acadia also highlighted the appointment of Bill Priest as chief compliance officer and Andrew Lynch as chief strategy officer.

The company’s ambitious growth plans have made analysts place bets on the company.

“[Management] has laid out plans to add 1,000 beds in CY23, boosting bed count by almost 10%, which lays out the base for ACHC’s growth algorithm,” Jefferies analysts wrote in a note. “Increasing interest from health systems for behavioral hospital JVs, along with further rate growth and margin expansion, should translate to organic EBITDA growth in excess of 10% over the next several years and drive positive earnings surprises.”

Acadia is also going full-steam ahead on joint-venture partnerships, with an academic focus. It has 18 joint ventures across the country, and its leadership team says it has a solid pipeline of potential new partnerships nearing announcement.

Acadia has inked JV partnerships with Henry Ford, Tufts Medicine, Covenant Health and Thomas Jefferson University.


Acadia CEO Christopher Hunter hinted that academic JVs could be a way to help feed the pipeline of new clinicians in the future.

“We continue to find ways in many different markets to improve the training of future clinicians and play whatever role we can play in that, which we believe will help the industry and Acadia over the long term,” Hunter said.

Roughly 130 million Americans live in regions with a mental health clinician shortage.

Acadia’s M&A strategy

Another growth avenue for Acadia is acquisitions. It has acquired both providers and real estate. In January Acadia announced the acquisition of CenterPointe Behavioral Health System, a Missouri-based provider with 260 acute care beds, 46 specialty beds for SUD and 10 outpatient locations. In 2021 Acadia purchased the real estate of three non-operational facilities in Chicago.

Despite macroeconomic headwinds such as the rising price of debt, Acadia plans to push forward with its M&A strategy in the future.

“On the M&A front in this environment, I think we all believe that we’re going to see more opportunity,” Hunter said. “Given our strong balance sheet, given the fragmentation of this market, there are many smaller players that I think will look to a partner over the next several years.”

Acadia is likewise well-positioned for M&A as the largest pure-play provider of behavioral health, he said.

“I do think that the pipeline is just going to continue to grow,” Hunter continued.

Broadly, value-based care and the acceleration of alternative payment models have fueled behavioral health M&A over the past few years. The COVID-19 pandemic especially jump-started behavioral health dealmaking starting in early 2020.

Similar to Acadia, many operators are looking to make deals in the final quarter of 2022 and into 2023. M&A advisory firm The Braff Group projects 2022 will end with around 204 transactions in the space.

As those aforementioned economic headwinds persist, PE buyers – which have been incredibly active in behavioral health – may take a more conservative approach to M&A, according to Dexter Braff, president of The Braff Group. Even so, operators such as Acadia will likely have to spend handsomely for attractive acquisition targets.

“All you people that think you want to be investing in behavioral health, you’re in the right space,” Braff said. “But you’re going to have to pay up to get into it.”

financial highlights

Acadia reported a total of $666.7 million in revenue, up 13.5% year over year. Additionally, it saw a 6.9% increase in revenue per patient day and a 3.1% increase in patient days.

This uptick in revenue is, in part, due to progress in paying reimbursement rate, which has historically been a hurdle for behavioral health operators.

“The key driver for our revenue per day growth throughout the year and for the third quarter continues to be pay-rate increases that we’re seeing pretty broadly across our service lines, and across many of our markets and payers,” Duckworth said.

Medicaid makes up about 50% of Acadia’s overall business.

Duckworth noted that the company has “seen in many markets a good rate increase this year for many of our states and Medicaid payers.” However, inflation may cause further rate increases in the future.


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