Acadia intends to scale CTC business by acquiring 4 new facilities

Mental health operator Acadia (Nasdaq: ACHC) is expanding its comprehensive treatment center (CTC) footprint with the acquisition of four new addiction care centers in Georgia.

Acadia’s acquisition of Georgia-based Brand New Start Treatment Center — announced Tuesday — brings the company’s overall network providing drug-assisted treatment (MAT) to 148 facilities.

This is part of the provider’s larger expansion strategy. Last week, during a conference call on its third-quarter earnings, the company said it’s on track to meet its goal of adding 600 beds in 2022. Its growth strategy consists primarily of mergers and acquisitions, start-ups and joint ventures.

“We feel like we paid a very fair price and were ultimately able to grow the business,” Acadia CEO Chris Hunter said during a fireside chat with Credit Suisse on Tuesday. “I think it illustrates our ability to look at a market and say that sometimes it makes sense to do a de novo project, sometimes it makes sense to work together on a JV front when it’s a brick-and-mortar facility acts. Other times, it makes sense for us to do mergers and acquisitions, and we’re constantly balancing that equation.”

Financial terms of the Brand New Start Treatment Centers deal were not disclosed.

Founded in 2005, Acadia is headquartered in Franklin, Tennessee. It has inpatient psychiatric hospitals, specialty treatment facilities, inpatient 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 website.

Acadia chose to purchase Brand New Start Treatment Centers rather than pursue a de novo strategy because the company had a very limited footprint in Georgia but saw a great opportunity in the market. Acquiring an established company would accelerate market entry.

Smaller deals like this could be part of Acadia’s future strategy.

“That’s why we’re excited about the increased reach in this market,” said David Duckworth, CFO of Acadia, during the Credit Suisse event. “There are some larger players in the industry and there can be a variety of valuation multiples that we see across the industry. But for a smaller supplement, which we think there are more out there, that could be attractive. It’s a great opportunity to overlay the de novo opportunity that we continue to pursue.”

Acadia is actively looking to grow its CTC business. In the third quarter, the company opened two new CTCs and is on track to open a total of six CTCs by the end of 2022.

This comes as rates of substance use disorders continue to rise amid the COVID-19 pandemic, according to the CDC. Drug overdose deaths increased by almost 30% from 2019 to 2020. The agency reports that 75% of overdose deaths involved an opioid.

In addition, state and local governments want to set up CTC facilities with money from opioid settlements.

Hunter noted that Acadia was approached by a county that received some settlement money and was interested in establishing an opioid use disorder (OUD) clinic. Acadia already had a presence in the county through an inpatient facility, but not through a CTC.

“I think there’s a chance, given our size, that counties know we have a wide range of services and they expect us to advise them and help them when they’re trying to put money in,” Hunter said. “There are so many different ways that the settlement funds can be used, but primarily it is about treatment and access to care.”

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