Acadia Healthcare (NASDAQ:ACHC) Company, Inc. ACHC has started the work on building a new 96-bed inpatient behavioral health facility named Geisinger Behavioral Health Center Northeast in Pennsylvania.
This facility — which will open in the fall of 2022 — is a joint venture between Acadia Healthcare, and Geisinger, a health and wellness organization. The center will address the growing need for accessible, high-quality behavioral health services in northeastern 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. 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 from mental illness in 2019 and 5.2% experienced serious mental illness. The market for behavioral services is further driven by COVID-induced mental sickness. With heightened rates of isolation and loneliness as well as financial, housing and food insecurities, the pandemic has taken a toll on the mental health of Americans.
The market for behavioral services will continue to grow due to increased awareness of mental health, and substance abuse conditions and treatment options.
In order to expand its market reach, Acadia Healthcare is resorting to several strategies such as a national marketing strategy to attract new patients and referral sources, increasing the volume of out-of-state referrals, providing a broader range of services to new and existing patients and clients as well as selectively pursuing opportunities to expand its facility and bed count through acquisitions, de novo facilities, joint ventures, and bed additions in the existing facilities.
Acadia Health’s Multi-pronged Growth Strategy
Acadia Health is bent on facility expansion by the addition of new beds and opening new hospitals. It expects to add 300 beds this year to meet the growing demand. The company is looking to enter underserved markets that can generate high returns.
Meanwhile, Acadia is also opening Comprehensive Treatment Centres (CTC) to address the rising incidence of drug overdose deaths, which increased nearly 30% in 2020 as a result of social isolation, trauma, and job losses from the pandemic, and the spread of fentanyl mixed in illicit drugs. In the first six months of 2021, 3 CTCs were opened and eight more will be opened in the second half of this year. It plans to open six to 10 CTCs each year from 2022 to 2025.
Opportunities Presented by the Pandemic
Capacity expansion will serve the company well, which is one of the leading behavioral healthcare providers. Acadia Healthcare is witnessing a growing market for mental health issues and substance use disorders as more people suffer from stress and anxiety related to the pandemic. Kaiser study in March 2021 found that about half of adults continue to report negative mental health impacts related to worry or stress from the pandemic compared with nearly the same percentage at the height of the pandemic in July 2020.
So far this year, the stock has gained 19.4% compared with the industry’s growth of 44%. The stock has enough potential to gain further, given many compelling factors working in its favor.
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It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other stocks in the same space like Community Health (NYSE:CYH) Systems, Inc. CYH and HCA Healthcare (NYSE:HCA), Inc. HCA have gained 49% and 58.9%, respectively, while Avita Medical (NASDAQ:RCEL) Ltd. RCEL has lost 0.7% over the same frame.
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