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Acadia Healthcare (ACHC) Buys Real Estate to Expand in Chicago

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Acadia Healthcare Company, Inc. (ACHC - Free Report) acquired the real estate of three non-operational facilities with cash in hand. The list of operations includes a 101-bed adult hospital, a 60-bed children’s hospital and an outpatient facility, situated on the north side of Chicago, Illinois.

The children’s hospital and outpatient facility are anticipated to open in the summer of 2022 while the adult hospital that will cater to geriatric services is expected to open in early 2023.

The latest move helped ACHC penetrate deeper into the greater Chicago region. The buyout aided the currently Zacks Rank #3 (Hold) hospital organization to enter a new market for the acute care business line. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acadia Healthcare also has plans to enhance its infrastructure so that patients can get improvised behavioral healthcare. This new structure will operate as Montrose Behavioral Health Hospital.

The deal is in line with Acadia Healthcare’s commitment to identify the underbedded markets for new facilities.

In September, Acadia Healthcare started building a new 96-bed inpatient behavioral health facility named Geisinger Behavioral Health Center Northeast in Pennsylvania.

Acadia Healthcare is a pure-play provider of behavioral healthcare services and is well placed in a market for mental health illness, which is set to expand further.

To this end, in February 2021, ACHC inked a deal to acquire the hospital and behavioral health services of Adventist Health Vallejo.

According to a 2019 survey by the Substance Abuse and Mental Health Services Administration of the U.S. Department of Health and Human Services, 20.6% of adults in the United States, aged 18 years or older suffered mental illness, in 2019 while 5.2% experienced serious mental illness. The market for behavioral services is further driven by the COVID-induced mental sickness. With heightened rates of isolation and loneliness as well as financial, housing and food insecurities, the pandemic took a toll on the mental health of Americans.

The market for behavioral services will continue to grow owing to a spike in awareness of mental health, substance abuse conditions and treatment options.

To expand its market reach, Acadia Healthcare is resorting to several strategies, such as a national marketing strategy to attract patients and referral sources, increase the volume of out-of-state referrals, provide a broader range of services to new and existing patients and clients as well as selectively pursue opportunities to extend its facility and bed count through acquisitions, de novo facilities, joint ventures and bed additions in the current facilities.

Acadia Healthcare’s Multi-Pronged Growth Strategy

Acadia Healthcare is bent on facility expansion through addition of beds and opening of hospitals. ACHC is looking to tap the underserved markets that can generate high returns.

Acadia Healthcare is also opening Comprehensive Treatment Centres (CTC) to address the rising incidence of deaths due to drug overdose, which increased nearly 30% in 2020 as a result of social isolation, trauma and job losses due to the pandemic and the spread of fentanyl mixed in illicit drugs.
ACHC leaves no stone unturned to contribute more to behavioral healthcare through its diversified service lines and a proven operating model.

As of Sep 30, 2021, ACHC operated 230 behavioral healthcare facilities.

In a year’s time, shares of ACHC have gained 16.5%, underperforming its industry’s growth of 38.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the medical sector are Zoetis Inc. (ZTS - Free Report) , NextGen Healthcare, Inc. (NXGN - Free Report) and AMN Healthcare Services (AMN - Free Report) .

With a Zacks Rank #2 (Buy) at present, Zoetis is a leader in the animal health space with a focus on both livestock and companion animals in major product categories. Its earnings beat the consensus mark in each of the trailing four quarters, the average being 12.7%.

NextGen Healthcare is a developer and marketer of healthcare information systems. With a Zacks Rank of 2 at present, ABC has a trailing four-quarter surprise of 16%, on average.

AMN Healthcare Services is a travel healthcare staffing company with a Zacks Rank of 1 at present. It has a trailing four-quarter surprise of 19.51%, on average.

Shares of NextGen Healthcare have lost 3.4% in a year’s time, while shares of Zoetis and AMN Healthcare Services have rallied 44.8% and 73.4% each.