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Expand chart
Data: Money.net; Chart: Axios Visuals

Over the past few years, Acadia Healthcare has saddled itself with huge amounts of debt, and top executive insiders have sold off stock in droves — a situation that doesn't inspire confidence in the future of the company.

Why it matters: Acadia is one of the largest operators of behavioral health facilities in the country, making it an important part of the nation's response to the opioid epidemic as well as broader mental health and drug addiction treatment.

Driving the news: Rumors have swirled that private equity firms, specifically KKR, are close to taking Acadia private, but nothing has been substantiated. Separately, a recent article by Penn Little, who runs his own investment firm in Chicago, raises red flags about Acadia's business. (Little does not trade Acadia stock but said a short position "would appear appropriate.")

  • Acadia is sitting on $3.2 billion of long-term debt thanks in large part to buying a bunch of facilities in 2015 and 2016, according to the company's latest quarterly filing. That number that has barely budged since the beginning of 2016 and mirrors the debt-laden situation of other brick-and-mortar health care companies like Community Health Systems.
  • Acadia's "net debt to EBITDA," a ratio that shows how well a company can pay down debt with the money it's generating, is well above what most financial experts say is tolerable. And it's raised the eyebrows of skeptical Wall Street analysts.
  • It could get worse: "With interest rate hikes, we are getting to a point where Acadia is going to have a hard time paying its debt," Little said in an interview.
  • Acadia is also hurt by the fact health insurance payments for mental health and addiction services are "bad" right now despite federal parity laws, said Emily Evans, a health care director at Hedgeye Risk Management.

Between the lines: Top executives and directors commonly sell stock, but they usually keep a decent amount to at least give the perception of long-term confidence in a company. That's not happening at Acadia.

  • Acadia CEO Joey Jacobs and Reeve Waud, the founder of his Chicago-based private equity firm that created Acadia, together owned more than 30% of the company in 2013. That's declined to less than 2% today.
  • Waud cashed in $1.9 million of stock earlier this month. Although a federal filing says the sale was predetermined in March, it still occurred just before the company's third-quarter financial release that missed Wall Street's expectations. He similarly had a smaller planned stock sale days before Acadia's second-quarter miss. Acadia's stock is now 28% lower than the price Waud sold at this month.
  • The Justice Department previously investigated another behavioral health company that Jacobs led, Psychiatric Solutions, over questionable compensation practices.

The other side: Acadia did not respond to multiple requests for interviews. Waud did not respond to questions, but a spokesman at an outside firm representing Waud's private equity group said Waud has followed federal rules that govern predetermined stock sales.

The bottom line: Interviews and financial documents indicate Acadia, a provider of mental health and substance abuse treatment for thousands of patients, is not on solid ground.

Go deeper

The hard math behind America's labor shortage

Data: Bureau of Labor Statistics, Congressional Budget Office; Chart: Axios Visuals

Yes, the pandemic has created unusual temporary labor market dynamics. But in the bigger picture, the 2010s were a golden age for companies seeking cheap labor. The 2020s are not.

The big picture: In the 2010s, the massive millennial generation was entering the workforce, the massive baby bo0m generation was still hard at work, and there was a multi-year hangover from the deep recession caused by the global financial crisis.

Advocates fret Roe v. Wade's 49th anniversary could be its last

Photo: Leigh Vogel/Getty Images for Women's March Inc

As Saturday marks the 49th anniversary of Roe v. Wade, the Supreme Court's landmark decision that legalized abortion access in the U.S., advocates warn the ruling is "more at risk now than ever."

The big picture: The Supreme Court in December heard a challenge to a Mississippi 15-week abortion ban that could throw Roe's survival into question, or at least narrow its scope.

Updated 11 hours ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds — Omicron pushes COVID deaths toward 2,000 per day — The pandemic-proof health care giant.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Starbucks drops worker vaccine or test requirement after SCOTUS ruling — Kids' COVID vaccination rates are particularly low in rural America.
  3. Politics: Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies — Federal judge blocks Biden's vaccine mandate for federal workers.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults.
  5. Variant tracker

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