Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue increased by 8.8% year-over-year to $796 million, driven by rate improvement and patient day growth.
- Adjusted EBITDA grew by 7.6% over the same quarter last year, reflecting solid operating leverage.
- Acadia Healthcare Co Inc (ACHC, Financial) added 37 beds to existing facilities in Q2, with a year-to-date total of 64 beds, and remains on track to add over 400 beds for the full year.
- The company opened a new 100-bed De Novo acute care hospital in Mesa, Arizona, and broke ground on a new 96-bed behavioral health hospital in partnership with Geisinger Health.
- Strong demand for CTC services, with plans to open up to 14 new CTCs in 2024, driven by the opioid epidemic and the need for medication-assisted therapy.
Negative Points
- Adjusted EBITDA margin slightly decreased to 23.6% from 23.9% in the same quarter last year, primarily due to the accelerated pace of recently opened De Novo facilities.
- Adjusted income attributable to Acadia stockholders per diluted share was $0.91, down from $0.92 in the prior-year period.
- Closure of two underperforming facilities during the second quarter, with a total of five closures in the last 12 months, indicating ongoing portfolio optimization challenges.
- Updated 2024 guidance reflects the closure of underperforming facilities, impacting revenue and EBITDA expectations.
- Provider taxes associated with supplemental revenue payments increased, affecting other operating expenses and distorting financial metrics.
Q & A Highlights
Q: Can you elaborate on the month-over-month trends and improvement in volumes, and provide any insight into July and the second half target space?
A: Volume growth accelerated over the course of the quarter, with same-store patient day growth improving month over month. July census was in line with expectations, and we continue to see same-store patient day growth comfortably in the mid-single digits for the second half of the year. We have added over 1,000 new beds in the past 18 months, which are ramping up nicely.
Q: There has been a pattern of closing more facilities this year. Is there a theme or internal focus driving this?
A: We have closed two underperforming facilities during the second quarter and five in the last 12 months. This is part of a continuous evaluation of our portfolio. If facilities are underperforming and we don't see a path to improvement, we take action. This is normal portfolio optimization.
Q: How are the Medicaid rate updates tracking relative to your expectations?
A: Most of our Medicaid revenue has contract years starting in the second half. We continue to expect mid-single digit rate updates for the full year. We don't have complete visibility yet, but we expect underlying rates to be similar to recent trends.
Q: Was there any material change in supplemental payments that impacted the results this quarter?
A: We had $10 million in guidance for the full year from one-time payments, with $7 million received in the first quarter and $3 million expected in the second half. There were some provider tax payments associated with supplemental revenue, but these were roughly in line with each other, so no material impact to EBITDA.
Q: Any considerations we need to factor in for Q3 modeling?
A: No additional considerations beyond what has been discussed. Volume, EBITDA, and rate increases are tracking in line with expectations.
Q: How should we think about any residual impact from Medicaid redeterminations for the back half of the year?
A: We have seen no material impact from redeterminations. Over 90% of our populations have already gone through the process with minimal disruption.
Q: Can you provide more color on the volume commentary and why there was acceleration as the quarter went on?
A: The sequential improvement throughout the quarter was expected and in line with our projections. We saw improvement across lines of business each month, and July was strong as well.
Q: What causes a facility to underperform and be closed?
A: Examples include challenges in finding staff for specific programs, such as a wilderness program in North Carolina. The year-over-year revenue drag from closed facilities has typically been around $5 million per quarter, but it has been about $12 million to $15 million per quarter in the first half of this year.
Q: How is the staffing backdrop in new areas you expect to expand into, and what gives you confidence in their performance?
A: We carefully choose geographies based on various factors, including the labor environment and payer reimbursement. Our initiatives around employee engagement and training have helped us manage staffing challenges. Our JV partners also help attract talent to new facilities.
Q: What is your view on the final Medicare IPF rates for FY 2025 and any policy items included?
A: The final rate of around 2.5% is in line with our expectations and what we had projected into our guidance. There are no other material policy items to call out at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
