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spk13: among others, regarding Acadia's expected quarterly and annual financial performance for 2024 and beyond. These statements may be affected by the important factors, among others, set forth in Acadia's filings for the Securities and Exchange Commission and the company's second quarter news release, and consequently, actual operations and results may differ materially from the results discussed in the following statements. At this time, I'd like to turn the conference call over to Chris.
spk14: Thank you, Patrick, and good morning, everyone. Thank you for being with us for Acadia's second quarter 2024 conference call. For the second quarter, we reported strong results, reflecting continued momentum in our business. Total revenue increased 8.8% over the prior year second quarter to $796 million, driven by both rate improvement and patient day growth. Our top-line growth, combined with solid operating leverage, led to adjusted EBITDA growth of 7.6% over the same quarter last year. Underlying labor trends remain stable into the second quarter. In addition to a more favorable overall labor market, our initiatives centered around recruitment, retention, and employee engagement have helped attract talent and maintain a more stable labor force. On a same-store basis, revenue increased 8.3 percent compared with the second quarter of last year. Overall demand for our services remains strong, and we believe we are well positioned within our markets for continued growth, especially as new beds continue to ramp over the course of the year. We also remain on track for adding approximately 1,200 beds this year, including the addition of over 400 beds to existing facilities which we believe will set us up for strong sustained growth in 2025 and beyond. Now, I'd like to provide an update on our progress against our growth strategy. During the second quarter, we added 37 beds to existing facilities, bringing the year-to-date total to 64 beds. Bed expansions continue to be one of our best uses of capital, and we remain on track to add more than 400 beds to existing facilities for the full year. We also remain focused on developing new facilities and underserved markets for behavioral health care services, including wholly owned de novos and strategic joint ventures. During the second quarter, we opened Agave Ridge Behavioral Hospital, a 100-bed de novo acute care hospital in Mesa, Arizona. We also continue to make progress in creating new opportunities through our strategic joint ventures. We're extremely proud to partner with Premier Healthcare Systems in strategic markets with a shared mission to integrate physical and behavioral healthcare. These partners provide strong market recognition as well as established relationships that are advantageous to Acadia as we enter into these joint ventures. Including our joint ventures and wholly owned de novos, over the past four quarters, we have now opened five new facilities. During the second quarter, we broke ground on a new 96-bed behavioral health hospital in partnership with Geisinger Health in Danville, Pennsylvania, which is their headquarters. This is our second joint venture facility with Geisinger and follows the successful opening of our 96-bed facility in Moosic, Pennsylvania in the third quarter of last year. Looking forward, we have strong visibility into the new bed growth opportunities with nearly 2,000 new beds currently under construction, including both new facilities and bed expansions to existing facilities. In the second half of 2024, we expect to open four new facilities, including two new joint venture facilities, a 192-bed joint venture hospital in partnership with Henry Ford Health System in Detroit, and a 144-bed joint venture hospital in partnership with Intermountain Health in Denver, Colorado. We are also on track to open up to 14 new CTCs in 2024, with three facilities already added to date via acquisition. Our CTC service line offers comprehensive care for patients who are affected by opioid use disorder, or OUD. As the opioid epidemic escalates across the country, we are seeing record demand for our CTC services. It is estimated that 9 million Americans are suffering from OUD, with a record 110,000 overdose deaths reported last year. As we have previously discussed, the increasing prevalence of fentanyl mixed with other potent drugs has heightened the complexity and severity of OUD. Improved access to medication-assisted therapy is essential to helping address this crisis. We remain focused on meeting the critical demand for this treatment and delivering an exceptional and convenient patient experience, including adding mobile vans and reducing dosing wait times. Importantly, we have maintained the highest level standards of care in our CTCs as evidenced by achieving scores of 99% across all 13 dimensions measured by the International Regulatory Body CARF. Acadia now operates 160 CTC locations in 32 states across the country. Extending the continuum of care is also important to our clinical strategy. One of our focus areas is expanding our partial hospitalization programs, or PHP, and intensive outpatient programs, IOP, that can provide four to six hours of care per day. These programs are advantageous for patients stepping down from an acute or specialty facility into a PHP or IOP program as they transition back into the community. Overall, with both PHP and IOP, we have established a strong track record of improved clinical outcomes post-discharge. And from a return on capital perspective, PHPs and IOPs are attractive growth opportunities for Acadia due to the relatively low capital requirements. We added 15 outpatient programs during the second quarter of 2024 for a total of 30 added through the first half of the year. And we will continue to focus on this important clinical service. Quality remains foundational to every aspect of the work we do at Acadia and is key to driving outcomes and operational effectiveness. Our quality initiatives are designed to support our clinical teams with enhanced training and development, and we continue to refine our processes to ensure consistency across our operations. We are making investments in programs that drive greater efficiency, including electronic medical records and patient monitoring technology. and we remain focused on investments that support the clinical side for both patient and staff safety. We recognize the importance of having quality measures and the right technology in place to make sure we are providing data that aligns with what our payer partners want to measure. We expect to compete on the strength of our clinical outcomes, and the ability to measure and demonstrate these outcomes is important to our payer collaborations. We are proud of our role as the leading pure play behavioral health care provider as the demand for behavioral health care services in our nation has never been greater. Whether serious mental illness, substance use disorder, suicide deaths, overdoses, each of these issues have been on the rise in the past year alone. The trends in our business through the first half of the year reflect this demand, and we look forward to the significant opportunities ahead for Acadia to extend our market reach and serve even more patients in 2024. Our strategic priorities remain focused on accelerating facility growth, expanding services across the care continuum, strengthening our core capabilities, and strategically leveraging technology to enhance patient care and improve clinical outcomes all with a focus on delivering the highest quality patient care. With our results to date, we remain confident in our ability to meet our growth objectives in 2024. We have the ability to leverage our proven operating model across our network of 258 facilities with service lines across the continuum of care. Importantly, we have the financial strength to support our continued growth. And finally, we're extremely fortunate to have over 23,500 committed employees and clinicians who work hard every day to address the nation's critical need for safe, quality treatment for mental health and substance use issues. At this time, I will now turn the call over to Heather to discuss our financial results for the quarter.
spk11: Thanks, Chris, and good morning, everyone. Our second quarter financial performance reflects continued growth across our business, We reported $796 million in revenue for the quarter, representing an increase of 8.8% over the second quarter of last year. Same facility revenue grew 8.3% compared with the second quarter of 2023, which included an increase in revenue per patient day of 5.6% and patient day growth of 2.6%. We were also pleased to see volume growth accelerate throughout the course of the second quarter, in line with our expectations. Adjusted EBITDA for the second quarter of 2024 increased 7.6% over the prior year to $187.6 million. Adjusted EBITDA margin was 23.6% compared with 23.9% for the same quarter last year. The year-over-year change in margin was primarily driven by the accelerated pace of recently opened de novo facilities. As Chris mentioned, we've now opened five new facilities in the past four quarters. Those facilities are ramping up nicely and remain on pace to deliver strong incremental volume growth and margin expansion in the back half of the year. On a same facility basis, adjusted EBITDA margins were flat in both the second quarter of this year and the prior year's second quarter. Adjusted income attributable to Acadia stockholders per diluted share was 91 cents compared to 92 cents for the prior year period. Consistent with previous periods, adjustments to income for the second quarter of 2024 include transaction legal and other costs, loss on impairment, and the related income tax effects of all items. We continue to focus on maintaining a strong financial position, providing the flexibility to make strategic investments that support our growth and fit our capital allocation framework. As of June 30th, 2024, we had $77.2 million in cash and cash equivalents, and $371.5 million available under our $600 million revolving credit facility, with a net leverage ratio of approximately 2.5 times. Moving on to our outlook for 2024, as noted in our press release, we have adjusted our previously announced 2024 guidance, which includes revenue in the range of $3.18 to $3.225 billion, adjusted EBITDA in the range of $735 to $765 million, adjusted earnings per diluted share in the range of $3.45 to $3.55, and total bed additions of approximately 1,200 beds. Please note that our updated guidance reflects the closure of two underperforming facilities during the second quarter. Prior guidance contemplated approximately $25 million of revenue contribution and break-even EBITDA from these facilities for the full year. As a reminder, the company's guidance does not include the potential benefit of state supplemental payments that have not yet been fully approved, nor does it include the impact of any future acquisitions, divestitures, transaction legal and other costs, or non-recurring legal settlements expense. With that, operator, we're ready to open the call for questions.
spk06: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. And if you're using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press star, then two. Again, we ask that you please limit yourself to one question and one follow-up on today's call. At this time, we will take our first question, which will come from Whit Mayo with Learing. Please go ahead.
spk18: Thanks. Good morning. I think, Heather, you mentioned in your remarks that the volumes accelerated throughout the quarter. Can you maybe elaborate a little bit more on the month-over-month trends and improvement that you saw, comment on the exit rate, and any insight into July and the second-half targets? Thanks.
spk11: Sure. Thanks, Whit. Yeah, I'd be happy to. Volume growth actually accelerated over the course of the quarter. Same-store patient day growth improved month-over-month, sequentially throughout the quarter. and volume remained strong into July, with July census in line with where we would have expected it to be at the beginning of the year. We saw that sequential improvement throughout the quarter across the lines of business, including acute and specialty, and we continue to see same-store patient day growth comfortably in the mid-single digits for the second half of the year. Maybe just a reminder, we have added over 1,000 new beds in the past 18 months, 400 of those in the second half of last year alone, and those are continuing to ramp nicely. And that includes two of our joint venture de novos that we will roll into the same store calculation count during the third quarter. And those are two of the most successful de novos that we've had to date. They're already running at 60% or more occupancy less than a year after opening. So just to reiterate, we feel really good about being comfortably in that mid-single-digit range for the second half.
spk18: Okay. And maybe just on the closures, there's been a pattern this year. You've closed more facilities than prior years. And I'm not sure if there's a theme here, anything to read into it. Maybe there's just an internal focus more to manage the portfolio more aggressively. But if you could just sort of share kind of what you guys are doing and why you're moving a little bit more aggressively with closures.
spk14: Sure. This is Chris. I'll take that one. We have made the decision to close two underperforming facilities during the second quarter, and we've closed five in the last 12 months. I would simply say this is just a process of just continuously evaluating the portfolio. If we're seeing facilities that are underperforming and don't see a path to improvement, we're going to take action. But I wouldn't read anything into it more than just constant evaluation and optimization that we'll continue to monitor going forward. Okay.
spk18: Thanks, guys.
spk14: Yep.
spk06: And our next question will come from A.J. Rice with UBS. Please go ahead.
spk08: Hi, everybody. I know part of the – dynamic of seeing the improved EBITDA from first half to second half this year. I think you've characterized that as about 10 million. Part of that was gonna be the bed conditions, what you just addressed, but part of it I think was also the timing of Medicaid rate updates coming in in the back half of the year. Can you sort of comment of how those are tracking relative to your expectations? I assume you got some in July and there's probably another batch that come in in October. How are those seeming to trend?
spk11: Yeah, thanks, AJ. I'll take that one. I'll start sort of just on the sequencing of EBITDA second half versus first half, and then I'll talk about the rates specifically. You know, there's three things really I would point to. The first is volume. You know, we just talked about how volume is trending and what we're seeing. Just to reiterate, you know, coming into the second half, we're going to feel really good about where the underlying volume trends are as they stepped up month over month and then stayed strong in July. And then we see that incremental volume coming in to the second half of the year from all the new beds that we've added that I just talked about. And specifically with those joint ventures coming into the same store calculations. From all of that, we had previously said and we still continue to believe that that specific cohort of beds is on pace and will contribute at least 10 million of incremental EBITDA in the second half of the year. you know, underlying volume, plus specifically the EBITDA from the new beds is coming in strong for the second half versus the first half. And then, you know, finally, rate updates, as you mentioned. You know, a majority of our Medicaid revenue has contract years that start in the second half versus the first half. And I think about EBITDA sequentially, second half versus first half, that's certainly, you know, a benefit that we would see that would improve EBITDA sequentially. You know, for Medicaid, you're right, we do see most of those updates in the second half of the year. We continue to think that our mid-single-digit rate updates for the full year is where we'll land. We don't have complete visibility yet, AJ, into those rate updates. October 1st is our biggest contract reset date, and a lot of those state rate updates tend to go into place retroactively, so we don't get rate notifications until after the period starts in some cases. So if we get more details on that, we'll keep you guys updated. But in terms of what's built into our outlook, Our outlook continues to include mid-single-digit rates for the year, and we expect underlying rates to be similar to recent trends, and that's what we've seen to date so far, but we just don't have the complete visibility yet.
spk08: Okay, and maybe one follow-up on the supplemental payment comment. A lot of focus on that these days, particularly on the acute side, but it obviously benefits you as well. Can you comment on whether there was any material change in supplemental payment either on the revenue line or the expense line that impacted the results in this quarter? And I know it's early on the Tennessee, but I think there's been some reporting out there that suggests that could be as much as 5% boost to your consolidated EBITDA if that program gets approved as submitted. And then is there any other programs you're keeping an eye on that are under discussion?
spk14: Yeah, AJ, this is Chris. Thanks for the question. Let me start on just the Tennessee supplemental program. Just a few comments here at the outset. I mean, I think, first of all, I mean, Tennessee is obviously our home state. We've been working with the state for a number of years on this program, and we just continue to be really pleased that they're moving forward with it. I think as everyone is aware, it's been approved by the governor. It's now with CMS for their review and approval, and we continue to think that the most likely scenario is that the program gets approved near the end of the year or early next year. And this would obviously for us apply to our acute hospitals across the state, which is about 950 beds for us in Tennessee, and we think that that would apply to roughly 70 or 75 percent of those 950 beds. So, we're not yet in a position to size it until the program is fully approved, but we would expect the benefit, of course, to be material once it is implemented. It's still working its way through the process, so we're going to just have to wait and see. But once it is approved, our understanding is that the program will be retroactive to July 1, but we haven't assumed anything in guidance for the program until we have more clarity there. And in terms of your question on, you know, other states, I mean, there definitely are other states that have the potential to expand these programs over the next few years. There aren't any that I would specifically call out, but we continue with our teams to be monitoring that very closely.
spk11: Yeah, I'll pick up on your question about sort of what we've seen to date, what's in the numbers and what we would expect. If we look at the first quarter and where we started the guidance, we had $10 million in the guidance for the full year from sort of one-time payments that we would call out. $7 million of that we received in the first quarter and called out, but we still have $3 million of that $10 to come in the second half of the year. So we still haven't received that. During the quarter, you know, you asked if there were any sort of unusual movements to point out. Yes, in other operating expenses, we did see... some provider tax payments associated with some supplemental revenue in the period. Those were, I would say, materially the same, so there's no real material impact to EBITDA. They were roughly in line with each other just due to timing. And those show up in other operating expenses, the provider taxes do. And so those tend to jump out on that line. But if you exclude those provider taxes that are, you know, effectively taxes on those pass-through payments, other OPEX would have been in line with the first quarter as a percentage of revenue.
spk07: Okay. Thanks a lot. And our next question will come from Brian Tankillet with Jefferies. Please go ahead.
spk17: Hey, good morning, guys, and congrats on the quarter. Maybe, Heather, just to follow up on AJ's question, anything we need to think about just as we model for Q3, just any sequential considerations that we need to factor in that you want to call out?
spk11: No, I think that covered it, you know, thinking about volume and EBITDA and then the rate increases. So there's nothing else I would call out on that.
spk17: Okay, got it. And then maybe, Chris, you know, as we think about redeterminations, obviously you've the process is essentially done, but just curious, you know, I'm guessing there was some impact still in Q2. So how are you or how should we be thinking about any residual impact for redeterminations back half of the year?
spk14: Yeah, thanks, Brian. You know, I would say that we just continue to see no material impact from redetermination at all. And, you know, at this point, we feel like we have almost no exposure left. well over 90% of our populations have already gone through the process. And we obviously spent, as we've talked about before, extensive time planning well over a year ago in advance of redetermination. And I think that planning and that execution has really served us well overall. So I would just say I'm really pleased with the work our team has done. Our patients experienced very little to no disruption. And we're really pleased to have that behind us overall. So I'll just leave it at that.
spk17: Awesome. Thank you.
spk14: Yep.
spk06: And our next question will come from Kevin Fishbach with Bank of America. Please go ahead.
spk05: Thanks. Can you just write a little more color on the volume commentary as far as, you know, ramping through the quarter? Is it largely just kind of the The issues you mentioned at the end of last quarter kind of being in the base and normalizing off of that, the new beds coming on, ramping up faster. Is there anything that you would kind of spike out as to kind of why we started to see that acceleration as the quarter went on?
spk11: I would say it's the former. So if you think about what we talked about on the last call, we expected for those underlying volumes to pick back up throughout the quarter, and that's exactly what we saw. We saw sequential improvement throughout the quarter across the line of business, and we saw that each month, quarter over quarter. And then we saw July really strong as well. I said it before, but I'll just repeat it. We are back at census levels for July that were in line with where we would have expected them to be at the beginning of the year.
spk05: Okay. And then maybe just to follow up again on the – the commentary about the closures, because it is a bit of a change over the last 12 months. And since it sounds like demand, broadly speaking, is incredibly strong, trying to understand, you know, what is it that actually causes a facility to underperform? Could you give some examples of, you know, what was going on at these facilities that made them, you know, ones where you just didn't see an opportunity for improvement?
spk14: Sure, Kevin, I'll take that. A few things. I would say we had one facility as an example that was a wilderness program in western North Carolina where we were having real challenges finding staff and counselors that could take adolescents into the woods for multiple days. We had no other programs like that, and it was really a one-off type facility. where we were struggling with staffing. So that's an example of something that we would look at in the context of optimization. I would say if you look back historically over the last few years, the year-over-year revenue drag from the closed facilities has typically been in the ballpark of around $5 million per quarter. So we have closed more than typical over the last few quarters, and I would say year over year from a revenue standpoint, it's been a drag of about $12 to $15 million per quarter in the first half of the year, and you can clearly see that in the same store revenue comps that we report relative to the prior year. So I would just say we have 258 facilities closed. This is normal portfolio optimization, as I mentioned before, and, you know, just we'll continue to monitor it going forward.
spk07: And our next question will come from Ben Hendricks with RBC Capital Market.
spk06: Please go ahead.
spk12: Great, thank you very much. Just to follow up on that prior question, I wonder if you can kind of contrast the backdrop for some of the new areas that you expect to expand into in underserved markets, kind of how the staffing backdrop is in those markets, physician availability, payer mix, et cetera. What are the key points that give you confidence that you're going to see good, strong performance in those facilities as they ramp up? Thank you.
spk14: Sure. I would just say that one of the things that we look at closely as we consider deploying capital are geographies that we think are attractive across a number of different dimensions. It could be the competitive environment, certainly the labor environment, payer reimbursement. there are all sorts of various factors there. And I think, you know, those are always considered. You know, I would say from a labor standpoint, you know, we've seen you know, market as everyone else has that has been challenged but stable over the last year. And we put a number of initiatives in place that have really helped us on that front continue to bring turnover down. You know, I think we've chosen geographies just very carefully that, you know, have less challenge. I'd say therapists remain hard to recruit overall. There are certain clinicians in various markets that can be challenging. by service line and geography. Rural areas are certainly tougher, but we continue to do a really good job of managing through that and have felt like we have been able to take real strides given many of the initiatives that we have put in place, particularly around The employee engagement surveys that we put in place that we haven't looked at historically, the training of our clinical staff that is new, and just a number of other things that we've just been very deliberate about ensuring that there is consistency across all of our facilities and that we're providing training to new employees in the same way. And then maybe the last thing I would add is just it really helps employees to have new technology and newer facilities. I think our JV partners do a tremendous job of helping attract talent to these new facilities that we're opening together. We obviously start that process many months, if not a year in advance of the facility opening. And I think that is one of the real advantages to these JVs that we're doing. They're really helping us on the labor front as well.
spk12: Thanks. And just if I could ask one on the legislative and regulatory backdrop, your peer UHS noted little fallout to date regarding the Senator Wyden investigation into RTCs. I was just wondering kind of what you're preparing for or expecting could come down the line from a legislative perspective, whether it be transparency, oversight, minimum staffing, et cetera.
spk09: Thank you.
spk14: Yeah, I would say we just haven't seen any real impact from the Senate hearing and the report. You know, I think we believe that the people that deal with this patient population every day, and that certainly includes our referral sources, you know, as well as the various regulatory oversight bodies that are routinely in these facilities, understand that this is just a really difficult population. I think they also understand that our facilities are are providing high-quality care to this population, and we demonstrate that routinely with the outcomes that we're able to achieve. And so we just haven't seen impact. I'd also point out that our RTC business is small. We only operate nine facilities. It's about 11% of our revenue, and so it's also not overly material from a financial standpoint to begin with.
spk09: And our next question will come from John Ransom with Raymond James.
spk06: Please go ahead.
spk02: Hey, good morning. Kind of an in-the-weeds question here. Just looking at your salaries and wages for patient day, it kind of bounces around as we move through the year. You know, 532 in the first quarter, 519 in the second quarter. How are you thinking about that metric if you happen to know that? And kind of zooming out, how should we think about the underlying inflation rate on kind of the same facility basis for labor? Is it still running like you saw it a quarter ago? Thanks.
spk11: Hi, John. Yeah, thanks for the question. You know, our underlying wage inflation continues to track favorably at just below that 5% level. As you recall, the high watermark was really in the fourth quarter of 2022, and we have been very focused on the efforts around that you know, in terms of employee engagement, retention, working with the local market operators. And we were able to bring that down successfully during the course of 2023. And we finished 2023 under 5% from a wage inflation perspective. You know, as with any company that operates in many markets, there's always going to be some pockets of challenge. But through the first half of this year, we've been able to successfully maintain that sub 5% range. And we would continue to expect that our base wage inflation will remain stable in that range for the rest of the year. And same with SWB per patient day, same story we would expect there. So really tracking in line with our expectations, and we continue to expect that to be stable for the balance of the year.
spk02: And if I could just follow up maybe for Chris, just kind of looking at the MAT business, I mean, the growth rate that the Novos have picked up, if we just disaggregate that business, I know it's reported in your consolidated numbers, but how should we think about the growth rate of that business? What are you targeting over the intermediate term? And, you know, kind of relative to the growth rate in your core facility business.
spk10: All right.
spk14: Yeah, thanks, John, for the question. I would say that, you know, this is a business that we continue to feel great about, I mean, particularly given, you know, the demographic trends with over 9 million people that are suffering from OUD. You know, we're up right now to, you know, 160 locations in 32 states. I don't want to put a specific target on a growth rate, but, you know, we've seen, particularly since Nassar came in, two years ago to run that business, just substantial growth. And not only have we seen growth, we've seen incredibly strong clinical outcomes, which I think have been beneficial in helping us with opioid settlement dollars, our best in class CARF scores, in addition to the fact that our turnover in that business has been really strong as well. Over 80% of our CTC patients are also opioid-free within six months of initiating treatment, which we also think is best in class. So we just feel really good about the prospects of that business and our ability to grow it going forward.
spk02: And is that business, what's the, I don't know, average length of study is the wrong term, but just the kind of median course of treatment? When patients enter and leave, what is that number?
spk14: Yeah, John, we don't have it offhand in terms of, you know, the exact specifics. I mean, it can obviously really vary. But, you know, I think the key metric is that those that are coming in, you know, we are able to get to opioid-free within six months. And, you know, after that, you know, it can really vary. But, I mean, that is a best-in-class measure right there.
spk06: And our next question will come from Scott Fidel with Stevens. Please go ahead with your question.
spk15: Hi, thanks. Good morning. Just was hoping to get your initial assessment. You've had all the way since last night, I guess, to review this, but just with the final Medicare IPF rates coming out for FY 2025, just your view on the adequacy of the final rate at around 2.5%. and then any call-outs on any of the policy items included in it, either positive or negative, or did everything so far seem to be pretty much in line?
spk11: Thanks for the question. You know, we're obviously still digesting it as it came out last night, but I would say early read, it's in line with our expectations. That's what we had expected and sort of projected into our guide for the year and no surprises there. As far as other things that we're tracking, you know, there's nothing really material on the horizon that we're tracking. Of course, we're, you know, following all the developments, but nothing I would point to specifically.
spk15: Okay, and then just a follow-up just on operating cash flow and CapEx, so the updated reaffirmed guidance. Just curious if there are any call-outs that you wanted to give us on sort of modeling that for 3Q versus 4Q on cash flow, any working capital or timing items that you would highlight, and same thing on CapEx, any tempo that you would call out between the 3Q and 4Q?
spk11: No, nothing really to call out. We continue to have a significant number of beds under construction, certainly this year, and that will go into next year as well. as we add those beds, but nothing specifically I would call out in the cadence because we're sort of in the midst of those incremental bed ads.
spk09: Okay, thank you.
spk06: And our next question will come from Pito Chickering with Deutsche Bank. Please go ahead.
spk03: Hey, good morning. We saw some pressure, sort of 1Q, 2Q, I guess, for the veterans, you know, the association opening up new beds. I guess, can you talk about how specialty started and ended the quarter and any sort of, you know, lasting impact from VA?
spk11: Hi, Peter. Yeah, we saw, you know, as I mentioned, we saw the sequential improvement each month in the quarter in volumes, and that included specialty volumes as well as acute volumes. have really seen that come back nicely in line with our expectations. And then I mentioned that that remained strong in July as well. And so feel good about those coming in line with where we thought that they would be. As far as looking through the rest of the year, we think that's going to continue to be in line with our expectations and see that volume improvement.
spk03: Okay. And then one quickie on CDC. What was the organic growth rate of that business And what's split between volume and pricing?
spk07: Thanks so much.
spk11: Yeah, sure. I'll take that as well. CTC, you'll see when it comes out in the queue that the CTC business grew about 9% from a revenue perspective on the top line throughout the quarter. We don't split the EBITDA or anything else by division or by line of business, but But that's what you'll see in terms of top line growth.
spk07: And our next question here will come from Andrew Mock with Barclays. Please go ahead.
spk04: Hi, good morning. I wanted to ask about the bed cadence. I think you've done 300 to date. So can you help us with just the cadence of the significant bed ads for the balance of the year? And it sounds like most of those would be in the fourth quarter. Just given how late those new and JV facilities are coming online, would you expect that group to be a net headwind or tailwind to 2025 earnings? Thanks.
spk11: Yeah, thanks for the question, Andrew. There's no material impact from that. It's sort of continuing as far as headwinds, tailwinds, or the impact of those new beds. It's continuing to track in line with what we had expected. at the beginning of the year, but you're right on the cadence of those beds coming in towards the second half and sort of weighted towards the end of the second half.
spk14: Yeah, and Andrew, thanks for the question. Why don't I just give you a little bit of additional color? I think, you know, clearly the JVs, you know, I mentioned in the prepared remarks, both Henry Ford, which is a 192-bed JV acute hospital in Metro Detroit, and coming on board later this year, as well as Intermountain, which is 144 beds in Denver. So, you know, it's 336 beds on the JV front by year end. And then we've got a number of de novos. I mean, we have already opened our Agave Ridge facility in Arizona. We've opened another one, Sable Palms, in Brooksdale, Florida. We've got another in Madison, Wisconsin, that we'll be opening later this year. And then you also need to take into account The fact that we have significantly ramped up our historical average of 300 bed additions to over 400, you know, is really evaluating markets that we think are attractive. And then I would just also note that on the CTC side, we're seeing continued demand there, and we've stepped up the number of CTC de novos from six last year to 14 this year. So a lot of construction going on, but we have a very strong team that is committed maniacally focused on execution right now, and we continue to feel very good about our ability to deliver on the 1,200 that we've committed to.
spk04: Got it. And then if I could, I just wanted to follow up on the other OpEx. I understand provider taxes flow through that line, so the trend can be difficult to parse, but it seems like those costs might be creeping up even beyond that. Can you comment on underlying OpEx trends beyond provider taxes? I would think you'd be able to generate better leverage on that line with the double-digit revenue growth. Thanks.
spk11: Yeah, sure, I'll take that. So just to reiterate, you know, the provider taxes that came through in Q2 are about $3 or $4 million higher sequentially, and that's really, you know, the taxes effectively on some pass-through payments that came through as well, but the provider taxes come through in the other OPEX line, so it distorts it. If you pull that out, excluding the step-up in those provider taxes, then operating expenses as a percentage of revenue are really right in line with what we saw in first quarter. So I wouldn't, there's nothing I would call out there other than that, but that's sort of what's distorting it a bit.
spk07: And our next question will come from Sarah James with Cantor Fitzgerald.
spk06: Please go ahead.
spk00: Thank you. Some clinical worker employers on the acute side have started talking about coming to what they think will be the end of the recovery cycle or reaching run rate on the recruiting, retention, premium labor recovery path. Can you talk about where you think you are on that journey and then on a broader sense where you think the behavioral sector is, how much room there's left for improvement?
spk14: Thanks, Sarah. You know, we continue to see just really strong progress. You know, our turnover continues to be flat to down across the company, and we put a number of initiatives in place that have helped drive that. You know, I referenced earlier just the consistent training programs, onboarding that we've put in place across our 248 facilities, our improved employee engagement. We had not done surveys before two years ago. We're getting ready to do another full survey here shortly, and then obviously putting all of this technology in place as well. We're always going to see some fluctuation by job category, service line, geography, but I think in totality, we've done a really good job of addressing this, and it continues to be just a major focus. I mean, obviously, our ability to staff these facilities is going to continue to be crucial to our ability to fill these beds that we're constructing and to continue to grow. So we're very focused on it and feel good about the progress that we continue to make year to date.
spk07: And our next question will come from Ryan Langston with TD Cowan.
spk06: Please go ahead with your question.
spk16: Hi, good morning. Maybe just a broader, bigger picture question. I guess, how are you thinking about the election dynamics? We're getting a lot more questions these days from clients on it, and I guess if the Republicans do retake the White House, I would still think there's broad support for behavioral services, but curious maybe just what you're hearing from state partners or just any other sort of broader thoughts you have on that topic. Thank you.
spk14: Yeah, thank you for the question, Ryan. I mean, I think we feel that there's still broad bipartisan support for for behavioral health across the country. And I think that's especially been true over the last few years. The importance of mental health, particularly coming out of the pandemic, has been increasingly recognized just year over year. And we just don't see that changing. So I think it's a little premature for us to speculate Beyond that, but I think overall just what we're seeing on the federal and the state side, there just continues to be tremendous support for the services that we're providing. And we'll continue to work with our partners in the state and in D.C. to continue to monitor this.
spk06: And this concludes our question and answer session. I'd like to turn the conference back over to Chris Hunter for any closing remarks.
spk14: Well, thank you. And in closing, I just want to again thank our committed facility leaders, our clinicians, and approximately 23,500 dedicated employees across the country who just continue to work tirelessly to meet the needs of patients in a safe and effective manner. We have such a strong foundation and a proven strategy for driving growth and delivering greater value to both the patients we serve and our shareholders. So thank you all for being with us this morning, and thank you for your interest in Acadia.
spk07: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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