Nov 29, 2018

The concerns surrounding Acadia Healthcare

Expand chart
Data:; 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

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 p.m. ET: 5,931,112 — Total deaths: 357,929 — Total recoveries — 2,388,172Map.
  2. U.S.: Total confirmed cases as of 3 p.m. ET: 1,711,313 — Total deaths: 101,129 — Total recoveries: 391,508 — Total tested: 15,192,481Map.
  3. States: New York to allow private businesses to deny entry to customers without masks.
  4. Public health: Louisiana Sen. Cassidy wants more frequent testing of nursing home workers.
  5. Congress: Pelosi slams McConnell on stimulus delay — Sen. Tim Kaine and wife test positive for coronavirus antibodies.
  6. Tech: Twitter fact-checks Chinese official's claims that coronavirus originated in U.S.
  7. What should I do? When you can be around others after contracting the coronavirus — Traveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Updated 19 mins ago - Politics & Policy

Twitter fact-checks Chinese official's claims that coronavirus originated in U.S.

Chinese Foreign Ministry spokesman Zhao Lijian. Photo: Greg Baker/AFP via Getty Images

Twitter slapped a fact-check label on a pair of months-old tweets from a Chinese government spokesperson that falsely suggested that the coronavirus originated in the U.S. and was brought to Wuhan by the U.S. military, directing users to "get the facts about COVID-19."

Why it matters: The labels were added after criticism that Twitter had fact-checked tweets from President Trump about mail-in voting, but not other false claims from Chinese Communist Party officials and other U.S. adversaries.

Podcast: Trump vs. Twitter, round two

President Trump is escalating his response to Twitter’s fact check of his recent tweets about mail-in voting, issuing an executive order that's designed to begin limiting social media's liability protections. Dan digs in with Axios' Margaret Harding McGill.

Go deeper: Twitter vs. Trump... vs. Twitter

2 hours ago - Politics & Policy