Q2 2021 Acadia Healthcare Company Inc Earnings Call
[music].
Good morning, and welcome to the Acadia healthcare second quarter 2021 earnings conference call.
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I'd now like to turn the conference over to Gretchen Homrich director of Investor Relations. Please go ahead.
Good morning, and welcome to Acadia is second quarter 2021 conference call I'm, Gretchen <unk> director of Investor Relations for Acadia I'll first provide you with our safe Harbor for turning the call over to Chief Executive Officer, Debbie Oseen to the extent any non-GAAP financial measure is discussed in today's call.
<unk>, you'll find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP on our website by viewing yesterday's news release under the investors link.
This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding <unk> expected quarterly and annual financial performance for 2021 and beyond.
For this purpose any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements without limiting the foregoing. The words believes anticipates plans expects and similar expressions are intended to identify forward looking statements.
Hereby cautioned that these statements may be affected by the important factors among others set forth in Acadia as filings with the Securities and Exchange Commission and in the company's second quarter news release.
Equally actual operations and results may differ materially from the results discussed in the forward looking statements. The company undertakes no obligation to update publicly any forward looking statements, whether as a result of new information future events or otherwise.
At this time for opening remarks, I would like to turn the conference call over to Chief Executive Officer, Debbie O'steen.
Good morning, and thank you for being with US today for our second quarter 2021 conference call.
I'm here today, with Chief Financial Officer, David Duckworth, and other members of our executive management team.
David and I will provide some remarks about our financial and operating results for the second quarter of 2021, and our increased guidance for 2021.
Following David's comments, we will open the line for your questions.
We are very pleased with the momentum in our business to the second quarter.
As the Acadia delivered a solid financial and operating performance.
These results reflect increased demand for our behavioral health services and our continued focus on delivering efficiencies across our operations.
We experienced favorable volume trends, while providing exceptional patient care across all of our service lines.
Before we get into the results I want to commend Acadia is dedicated employees and clinicians across our operations, who have continued to meet this critical demand for our services.
And provide high quality care in a safe and accessible manner.
We have a proven operating model supported by an experienced team as.
As well as the financial strength to support our ability to reach more patients who need our services.
For the second quarter of 2021, our facilities produce strong results.
Our same facility revenue increased 18% compared with the second quarter of 2020.
Including a 9.8% increase in patient days and a 7.5% increase in revenue per patient day.
As a reminder of the impact from the Covid pandemic and related restrictions, we experienced lower patient days in the second quarter of last year.
Same facility patient days decreased 6.7% in April of 2020 as compared to 2019.
Reverse 2 an increase of 0.1% in may and in June surpassed our pre COVID-19 volumes and increased 4.7%.
When adjusted for the approximate 5% volume impact from Covid last year pace.
Patient days increased approximately 4.8% for the second quarter of this year.
We are pleased to see the solid volume trends.
Leveraging the strength of our diversified service lines.
Acadia is well positioned to meet the needs of those seeking behavioral treatment and.
And we expect to see continued growth in demand.
The stress and anxiety related to the pandemic had a profound effect on many individuals, especially those already struggling with mental health issues and substance use disorders.
Ah Kaiser study in March 2021 found.
<unk> found that about half of adults continued to report negative mental health impacts related to worry or stress from the pandemic.
Which compares to about the same percentage at the height of the pandemic in July 2020.
We believe we are also seeing higher demand.
Societal acceptance of behavioral health increases with a greater push for access to treatment and expanded coverage options for those who seek treatment.
On our previous Investor calls, we have shared Acadia is growth strategy that is centered around 4 distinct pathways that we believe will provide additional opportunities for acadia to reach more patients in new and existing markets.
I am pleased with the progress that we continued to make as we drive organic growth and make strategic investments designed to support our long term growth across our service lines.
Facility expansions remain a primary focus of our growth strategy and the best return on investment.
We added 86 beds to our operations in the second quarter, which included 72 incremental beds from the opening of the 260 bed state of the art replacement Hospital for Belmont Behavioral hospital in Philadelphia.
We expect to meet our goal to add approximately 300 beds. This year to meet the growing demand.
We also continued to identify underserved markets for behavioral health and substance use treatment, including treatment of patients suffering with opioid use disorder.
Preliminary data from the CDC indicates that drug overdose deaths increased nearly 30% in 2020 as a result of social isolation trauma and job losses from the pandemic.
And the spread of fitting all mixed in illicit drugs.
To address this critical and growing need.
We opened 1 CTC in the second quarter of 2021, following 2 new Ctc's opened in the first quarter.
Ctc's operate on an outpatient basis, and combined behavioral therapy and medication to achieve long term recovery from opioid use disorder.
We continue to see opportunities to help more individuals struggling with addiction.
And we expect to open 8 more ctc's in the second half of 2021.
Another important growth opportunity for Acadia is the development of wholly owned de Novo facilities in markets with a shortage of beds for behavioral health treatment.
On May 24th we opened Glenwood behavioral health.
80 bed hospital in Cincinnati, Ohio.
This facility provides inpatient psychiatric treatment for those who are struggling with the mental health or a co occurring substance use disorder.
As mental health issues have gained more national attention health.
Health systems across the country are looking for ways to integrate behavioral health and expand treatment options.
Acadia has developed a favorable reputation as the preferred partner for many leading providers in attractive markets.
We recently announced a joint venture with Bronson healthcare.
1 of Michigan's leading integrated healthcare systems to build the new 96 bed facility in Battle Creek, Michigan.
With this addition, we now have 13 joint venture partnerships in place with Premier Health systems to expand our treatment network and improve access to care in more communities around the country.
Joint venture partnerships, such as Bronson provide an opportunity to leverage our combined expertise and resources with a shared commitment to provide quality care and achieved strong clinical outcomes.
We will continue to pursue this important pathway of growth for Acadia in the year ahead and beyond.
Finally, we also believe that the fragmented behavioral healthcare industry on.
Offers additional prospects for future acquisitions.
And we are well positioned with sufficient capital to pursue these opportunities.
We believe Acadia has the right strategy in place too.
To expand our network through bed expansions wholly owned de Novo facilities strategic joint ventures and acquisitions.
We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services.
As always.
Our primary mission is to meet this demand and support the patients and communities we serve.
We will continue to focus on providing the highest quality of patient care.
While extending our market reach and advancing our position as a leading behavioral healthcare provider.
Now I will turn the call over to David Duckworth to discuss our financial results in more detail.
Thanks, Debbie and good morning revenue for the second quarter was $582.2 million.
Paired with $491.5 million per the second quarter of 2020.
Growth rate of 18, 5%.
For the second quarter of 2021 net income attributable to Acadia stockholders was $44.5 million or <unk> 49 cents per diluted share and adjusted income attributable to Acadia stockholders per diluted share was <unk> 71.
For the current and prior year periods presented in our earnings release, our adjusted income excludes transaction related expenses.
Debt extinguishment costs loss on impairment and the income tax effect of these adjustments to income.
<unk> adjusted EBITDA for the second quarter of 2021 increased 25% to $141.3 million compared with $112.8 million for the same period last year.
Same facility adjusted EBITDA margin improved 180 basis points to 29, 3%.
During the second quarter of 2021, the company received $24 million of additional provider relief funds under the cares Act.
These funds have not been recognized in the second quarter or included in our 2021 guidance.
We are evaluating the guidelines to determine whether any of the funds will be recognized or will be returned.
During the second quarter, we repaid $41 million of debt, including $35 million on our $600 million revolving credit facility.
<unk> the outstanding revolver balance to $125 million at June 32021.
The company's net leverage ratio was approximately 2.4 times as of June 32021, and cash at the end of the second quarter was $185.5 million.
As noted in our press release, we have revised our full year expectations due to our strong operating and financial performance for the first half of this year and our outlook for the second half of the year.
We have increased our 2021 financial guidance as follows.
Revenue now in a range of $2.280 billion to $2 billion $320 million.
Adjusted EBITDA now in a range of $530 million to $550 million.
Adjusted earnings per diluted share now in a range of $2.52.
To $2.70.
And operating cash flows now in a range of $275 million to $310 million.
Our guidance for 2021 reflects our expectation that the recent trends in patient volume and pricing and the focus on cost efficiencies and discipline will continue in the second half of the year.
As a reminder, this guidance does not include discontinued operations or the impact of any future acquisitions divestitures or transaction related expenses.
With that Andrea we are ready to open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then 2.
We ask that you please limit yourself to 1 question and 1 follow up.
At this time, we will pause momentarily to assemble the roster.
And our first question will come from Kevin Fischbeck of Bank of America. Please go ahead.
Great. Thanks.
I wanted to.
Dig into labor costs, it seems like some loans.
That providers.
I've been signaling that labor is getting more and more difficult to source.
Some companies are talking about that as being getting factored to Greg I just wanted to hear what you're seeing and how you feel about that.
Labor pressure on growing or just margins going forward.
Well, Kevin I think generally we have seen a tight labor market, but I believe that we have done a very good job on managing through it.
Have a very strong consistent focus on recruiting and also retention.
We're in many markets. We are in 40 states and we do see from time to time isolated staffing challenges I think that the team has done as I said, a good job, they're very aggressive and we've been very proactive in our approach. So our goal is to be competitive.
In our markets, we have very robust local efforts and focus and we also have a corporate team that supports the facilities. So they are recruiting and helping new facilities with with some of the challenges that are there we haven't seen a significant disruption or change.
<unk>.
In the cost of our staffing our agency labor has been pretty consistent it's around 2% of our total labor. So I think we're managing through it I think it takes a lot of effort and focus and again I just have to commend the team because I think they've done a good job with just managing that and making sure.
Sure that we're not limiting our growth.
Alright, great and I think you referenced earlier some of the press release spec.
On the favorable reimbursement environment I guess, there was a high profile.
On your pressure by United and growing out of network.
Wondering if you or I guess your color on on that.
Maybe specifically, but then more broadly speaking.
What the reimbursement outlook looks like them on commercial payers. Thanks.
Yes, Kevin.
We do have very long lasting strong relationships across our diversified group of payers and including our commercial payers.
The majority of our commercial over 90% of our commercial revenue is in network.
And so we are pleased with that strategy.
And pleased with the relationships that we have the referrals that we get across our commercial payers.
We are aware of the announcement you are referring to.
But do.
We do not believe that it has an impact on our company given that we are mostly in network with United.
In fact believe that with that strategy, we could see some benefit to our volumes because we do have most of our facilities in network. So.
Out of network for the company across our U S operations is about 2% of our revenue and again over 90% of our commercial.
Our revenue is in network. So we think we're positioned well and any potential impact not only could be limited, but also could provide some benefit in certain markets in certain facilities.
Alright, great. Thanks.
The next question.
<unk> comes from Ralph Giacobbe of Citi. Please go ahead.
Great. Thanks, Good morning Debbie.
In your prepared remarks, you talked about seeing more push for access for behavioral health, hoping you can give a little more context is it employer states does it relate to payers is it the telehealth influence just trying to understand where that push for that incremental behavior on expenses coming from price.
Well, Ralph I think when we think about access to our services many of our patients come to our inpatient facilities start usually in a lower level of care and I think that there is a shortage of practitioners in many markets. So I think.
What we have seen through telehealth is in some of the outpatient companies is really trying to make sure that people that need our assistance for mental health and addiction can can see.
A person a professional that can help them diagnose what their needs are.
Do think that as we think about just going forward.
We are really trying to make sure that people can reach us we've done we have a crisis hotline that we have.
<unk> instituted last year during the pandemic, but there are other funding sources for these hotlines in crisis centers, where people can access.
And reach out with the suicide.
Rates that are climbing I think it's even more important that people be able to get service.
At the right time, and not have to way in any or other places. So we are working with our partners on making sure that they can access our facilities, but then just generally I think theres, a real movement and in funding around it frankly for access so that as this pandemic has unfolded.
<unk> and many individuals have needs 1 of the studies I read recently half of adults continued to report negative mental health impacts. So as we see this they need to be able to access someone that can help them and so we're a part of that but I think it's happening really across the.
Free.
Okay. That's.
That's helpful. And then it does seem like the joint venture efforts with hospitals and larger systems is accelerating.
As a catalyst you think at this point.
The COVID-19 pandemic or anything else that would be driving that and maybe just give us a little bit more on the pipeline and how easy or difficult. It is to integrate and operate sort of the JV relationship versus M&A or de Novo build you can help us with the economic share. Thanks.
Sure I mean, we thought that we would see less discussion during the pandemic and in fact, we actually saw more and I think that our potential partners wanted to keep the momentum going they have really started and I think these large health systems really 1.
On to see mental health and physical health put together. So this is started before the pandemic, but I do think it continued to be strong.
Throughout 2020, we do have a robust pipeline and we have projects that are in different stages, we recently announced the bronze and which I mentioned in my remarks. We also planned to we have a groundbreaking actually later this week for a JV with Lutheran.
<unk> network in Indiana, We just announced a partnership with <unk> to build 2 hospitals.
So as we think about just our pipeline going forward. There is usually a competitive process. There are others that are <unk>.
Seeking to partner, but we have been fortunate because I think our track record stands for itself.
And we have been chosen as preferred partners with many health systems, we have signed several LOI that we have not announced.
We will do so when we have a definitive agreement and I think that what we have seen is that as we work together.
We're able to enter a market with a strong partner they have established reputation and so together as we build a facility which is usually in fact always what happens together with their relationships with payers and and certainly their referral pipeline usually there.
They're closing beds and that's folded into the partnership so it does give us an advantage if we're entering a market to do that with a partner.
And as far as just ramp up on other things it usually moves a little bit faster and I think that certainly the payer relationships helps us with our price.
Negotiations with payers, but we think we're very fortunate because I think that we have these 13 partnerships now and they all check references when they make a decision and we're fortunate that we have such a strong reputation again I give a lot of credit to those that are in the field working with these.
Partners, and we really want to to see that as a growth pathway that will continue for free for several years, because we do have over 30 in the pipeline right now.
Got it thank you.
The next question comes from Brian Tim Quillin of Jefferies. Please go ahead.
Hey, good morning, guys, congrats on a really strong quarter.
David I guess I'll start with you you mentioned something in your prepared remarks about cost efficiencies that you expect to carry over into Q2, just wondering how you're thinking about that given the tight labor market.
<unk> managed through it pretty well, but also as we think about kind of long term long term margin targets from a same store perspective.
Where should we be thinking about where that would land.
Yes, Brian.
The operations team has done a fantastic job for several quarters now.
Managing the.
On the volumes and really seeing with the incremental volumes that we've seen the opportunity to drive efficiencies and to leverage the cost structure that we have and that is reflected in our margin.
We are managing through as Debbie mentioned, the tight labor market.
But it really shown that as we see the incremental volumes, we can manage through that labor market that we're going through right now and we have seen.
The sustained benefits of many of the cost savings programs.
I know we've talked about for the last couple of years.
The team continues to do a good job maintaining discipline.
Really focused on using our data our dashboards and just weekly visibility into costs at the facility level. So that we're.
Able to staff and see the volume growth that we see and also match our costs. According to the volumes that we see.
Going forward.
We do continue to add capacity, we're working on our pipelines across all of our growth pathways.
And part of that is adding beds to our existing facilities we.
We do think that that additional capacity that we add will drive further margin improvement opportunities.
We size that Brian is is that that should add around 50 basis points.
Margin improvement too.
Our same facility group of facilities.
We will continue of course to invest in new facilities joint ventures, and de Novo's and so that's that's the startup process that's an investment.
Those are very attractive longer term opportunities.
But outside of that same facility group, where we expect to see the 50 basis points of margin improvement and we will see some investment in that.
But once those mature we think those will be accretive to margins as well so.
We think with the additional capacity that we plan to add we will continue to see that margin improvement opportunity.
That's awesome and then I guess Debbie for you there are a lot of.
Yes, there is a lot of chatter about some sizable assets that are out on the market right. Now how are you thinking at this point about your view on M&A.
Picking large deals versus tuck in transactions and maybe interest any insight you can share on the pipeline. Thank you.
Well, while we continue to see a fragmented market, which I mentioned in my remarks for behavioral and I do think that there are a number of the smaller multi facility systems and then certainly single facility operators that present.
Future opportunities for us.
We look at I mean, we don't comment on any specific transaction, but as we look at.
The M&A on.
The opportunities we use a disciplined approach and we are looking at the strategic fit as well as the financials. So as.
As we look at the strategic fit what the synergies might be.
Whether we're going to be able to enter a new market.
We also are looking at the financial component, which is return metrics for us the IRR or the return on.
On invested capital.
Think that we will see and we will have opportunities for M&A, we're going to stay disciplined and we're going to make sure that it fits us.
Good thing about Acadia, which.
I think is good for long term is we have a number of ways to grow and we have a number of ways to grow organically, but then I also think there will be opportunity and I think that.
Fortunately, we are well informed.
Of what's out there and we do have an opportunity to evaluate we do a very I think a thorough job of that but also I think that will be something that will be.
The opportunity for us in the future with just what I see with even just the single facilities and some have frankly, not fared as well through what all of us have suffered through the pandemic, but I think that.
We have an experienced team here, who who knows what to look for and we're going to stay disciplined as we do it.
Awesome. Thank you Debbie.
Thank you.
The next question comes from a J Rice of credit Suisse. Please go ahead.
Hi, everybody.
2 questions I guess first on the I appreciate all the comments about how the dynamics have changed in the pandemic in terms of illnesses and behavioral concerns I Wonder if you look at your patient population Youre treating now.
Is the orientation of the services changed.
Materially that you have certain.
Services serve diagnosis that or.
On a much more prevalent right now than maybe pre pandemic and I guess is that have any implications for payer mix or other metrics that we should be aware of.
Well, a J I think that as we see patients coming into our facilities certainly.
They have to make the medical necessity. So they are acute and they are individuals that need very specialized services.
I think as we just think about the impact we've seen multi <unk>.
<unk>.
Diagnosis for those that are needing treatment for substance use.
And I think that that is something we can see just from the overdose deaths and just the staggering to me statistic that was <unk>.
Put out by the CDC that that is a real area of need so we see that in our specialty facilities also not just substance use the co occurring which are mental health issues that are a part of the of the patients issue. We also have seen demand across our <unk>.
And that stayed very steady last year, but it's continued into this year and that is why we're opening the number of new CTC clinics, we do see.
Individuals that are depressed and suicidal that's what are the criteria, but that has actually risen during the pandemic and I think again just.
Our facilities have done a great job of being prepared it's really the patients that prior to the pandemic, we were trading but now in some of our locations. We are seeing more acuity and and I think that we've been asked by some of our payers to develop more even more specialized programs.
We've done I think that's benefited the specialty service line, but really the acute and specialty have both just been very strong demand and again I think that's going to continue.
Maybe the follow up question would be around.
There's a lot of discussion in the marketplace about.
Use of telemedicine to address.
Hey, real needs and so forth the outpatient people looking at outpatient.
How do you guys view that do you view that is totally sort of distinct silo from the things you're focused on do you feel like over time, its going to be important for you to be integrated with some of those initiatives. How do you think about that.
Yes.
Well I think that's probably 1 of the positives that has come out of the pandemic is really just the regulatory environment around telehealth and also the payment environment.
We do see it as part of what we do and we are using it now.
We use it in our facilities to support our existing services. We are also we are going to be expanding some of our specialty services.
Across the country, and we're going to use that as a way for them to stay connected with our programs. We've found it to be an extension for us of coverage for physicians.
Which I think we when we have a physician shortage oftentimes, we're forced to use locum and in this case. It is an alternative to locum coverage.
I do think that telehealth will be a key part going forward, it's not going to replace.
Our inpatient care, our patients need to be in a safe environment and I think that we see it as just part of what we're doing and we have a team.
Led by our Chief Medical Officer, a day that they're looking for ways, where we can integrate but I do think we're going to be connected to some of the telehealth companies that have come up we have seen a decline in this year of telehealth usage last year it was about 20%.
And this year, it's about 10. So there are individuals that prefer to have the face to face but there are also individuals that are in rural areas are those that really don't have access to that want to use. It. So I just think it's a positive for the industry is an extension of what we do and we will be looking for.
Ways, we can use it even more but right now even on the CTC, we're using it for our counseling and therapy and it's it's been something that patients have asked for and we are providing and so I do think is here to stay it'll be interesting to see what the regulatory environment ends up being.
I know payers are looking at whats appropriate what theyre going to pay for how they're going to pay for it how the delivery should be done and we're watching that very closely to see how that ends up in advocating for it frankly, because it's a way to extend access.
Okay, great. Thanks, so on.
Thank you.
The next question comes from Peter Chickering of Deutsche Bank. Please go ahead.
Hey, good morning, Thanks for taking my questions. A couple from me at this point can you talk about the revenue per day, a little more COVID-19.
Break that into a commercial price increases versus mix, what's the biggest driver there and talk about the collaboration between you and your peers on specialty and how we should think about revenue per day, increasing over the next couple of days or years.
Yes, Peter we were pleased to see the strong revenue per day trends continue we had revenue per day. This quarter of 816, and we saw something very similar in our first quarter. The key drivers for that are rate increases across all of our payors, which.
We did meet our expected range of 2% to 3%.
And we're also seeing a favorable payer mix.
Where commercial has grown slightly as a percentage of our revenue. It's typically just under 30% and this quarter. It was just over 30% close to 31% of our U S revenue and net commercial mix really does reflect the strong relationships we have.
Across our commercial payers and also the performance of our specialty facilities, which is where we see a higher level of commercial volumes.
So we do believe we are positioned well.
There is a component of our revenue per day growth. This quarter that is a challenging comp to last year. We did see a different service mix in the second quarter of 2020 with acute and specialty.
<unk> temporarily lower on patient volumes, and therefore, RTC mix was a little bit higher.
So thats part of our 7.5% revenue per day growth this quarter, but as we look ahead, we think where we are right now the 816.
As a very strong metric, we do expect that to continue.
This year.
And that will continue to provide revenue per day growth probably more in the 2% to 3% range.
Given that a component of this quarter is the comparison to last year, but we do think a lot of the trends that we see in the revenue per day that we see will continue moving forward.
And Peter we have a very.
Focus around.
Our payers and making sure that we are demonstrating.
Our outcomes and also making sure that we are providing and David mentioned it more specialty services for them and as we do that we are seeing the ability to have higher rates, because we're able to demonstrate that we have the outcomes that go with.
It.
Our out of state has also added to that during this quarter.
As we bring patients from out of state to our highly specialized programs day. They do tend to be a higher commercial mix and we expect that to continue as we go forward.
Great and then a few quick follow ups and ill ask them upfront to save time.
Any more details on sort of what you're seeing on the Delta variant.
In July.
Can you guys talk about from a seasonality in the back half of the year, what we should think about from <unk> and <unk> and then on the labor side. If you look at our behavioral technicians vs. Nurses do you see any more or less pressure on on what type of employee versus the other thanks. So much.
Well I'll take the first part of that.
We have seen a slight uptick in the number of COVID-19 patients.
In a few facilities, we haven't seen a significant increase at this point and it hasnt had an impact on volumes or our staffing.
I do think that if we do see another way then it certainly you know theres a lot of discussion about how this is going to impact everyone. We feel that we're well prepared.
With our robust procedures, our staying in communication with our facilities, making sure they're ready.
We have maintained I think all of our.
PPE supplies as well as just our protocols as even as we saw COVID-19 start to decline, but I think most important which.
Want to emphasize is we planned to.
Treat our patients as they come to us we want to ensure they still have access to care. So we're ready if we do see COVID-19 and the Delta variant.
And I think we feel good about our procedures that they're really in the height of the pandemic, we were able to manage those so that is something we're watching closely but we're prepared for it.
David I'll, let you go on seasonality, we do expect that third quarter could be very similar to the second quarter.
So there's not a lot that's seasonal in that.
<unk> has a significant impact at least from the second quarter to the third quarter in the fourth quarter. We typically do see some holiday seasonality in certain service lines around our census.
Typically with size that is having about a $3 million to $5 million impact in the fourth quarter compared to the third quarter and that's around where its been in the past so the third quarter might be a little bit stronger than the.
<unk>.
Fourth quarter.
But we do think the trends will continue and the only seasonality we would really highlight would just be right at the end of the year around our service line census.
On your labor question.
We wouldn't highlight any specific group of employees. It does depend some on the service line.
Certain service lines are more reliant on nurses as compared to other clinical employees.
Where specialty there would be more therapist in our RTC business would be more of the mental health techs and not as many of the nurses but.
It does depend on the market and it's a very market specific approach and as Debbie mentioned, we're focused on recruiting resources at the local level and the corporate level to make sure that we're able to staff our facilities.
It can depend on the market, but I think we're focused on all of our clinical groups of employees nurses and attacks.
Great. Thanks, so much variance quarter guys.
Thank you. Thank you.
The next question comes from John Ransom of Raymond James. Please go ahead.
Hey, good morning.
David If we look at 2020, 1 how much do you think.
The CTC business.
Factors that as a percentage of your same store revenue growth.
John I think.
For this particular quarter.
Acute, especially where the service bonds that were really the strong contributors to our growth.
And part of that is just seeing very strong current year trends and part of that is seeing that those are the 2 service lines last year that had a temporary impact and the decline in their centers.
See last year did stay very stable.
And so I would say CTC revenue growth is more than our typical range.
Strong single digit type growth for the CTC business, where acute and specialty because of the comp and because of some strong census trends. This year are leading among our 4 service bonds.
Great.
Just kind of looking.
Over the next 5 years.
I know you guys have not.
There are made from our growth.
On a per medical records to electronic medical records is that something that you think.
And then your future, though do you have what he thought about.
What sort of capital investment that might look like.
Yes, John we do actually have certain facilities that do have an electronic health record system.
We are.
Implementing that and focused on many of our acute facilities.
That's where we do have some within our existing portfolio of facilities. We do have a plan and it begins later this year to begin investing more in those implementations and again are focused on any of our acute facilities and many of our joint venture facilities.
We bring online.
Yes.
We will range from title EHR system. So the capital that we're expecting of course it depends on the.
The system that you use I think we have.
We have a good plan to improve our systems and make that transition.
With a partner that will be.
A slightly lower cost.
And then many of the investments that I know we've evaluated in the past. So we're excited we'll have more to share on that probably as we move into next year, but we are beginning to work on that transition.
Can you say at this point, how your vendor is for that project.
No I don't I don't know if we can so I'll just say no. We can right now, but we will share.
Aaron that later.
Okay. Thanks, so much.
Thank you John Thank you John.
The next question comes from Frank Morgan of RBC Capital markets. Please go ahead.
Good morning.
I know a lot of discussion has been around commercial pricing, but just curious if you could give us an update on the state reimbursement side.
The kind of updates you are seeing any kind of supplemental payments that you may be getting or expect to continue to get and.
Or any changes you expect to see there. Thanks.
Yes.
The state level reimbursement, we of course do have a significant per.
<unk> of our revenue that is Medicaid.
That's across 40 different states that we're in so we are very diversified within our Medicaid revenue and of course.
Most of that at this point in our acute <unk>.
Service line I think over 80% of our acute Medicaid revenues with a managed Medicaid payer.
So we continue to see at the state level very positive coverage trends.
Of course, we've talked about that with our CTC business really improving across our states, but the coverage for behavioral health continues to be very strong at the state level.
We have not seen any.
Rate decreases within our Medicaid.
Payers and continue to expect to see 1% to 3% is how we think about Medicaid going forward.
But many states could be stronger than that really depends on what the historical rate increases have looked like within each state and within each payer. So continues to be a very stable very good payer for us.
To see that would be very diversified across our states.
Okay, maybe 1 last 1 back to the sequential GAAP.
Guidance for the or comments for the third and the fourth quarter on no third quarter has always been a tough 1 so I guess what.
What level of competency you have this year say versus past years, where it seems like third quarter has always been sort of a.
Not as predictable.
Well, we did our first third quarter in a number of years without the UK business and I do know that the summer and in particular August was interesting in the UK with.
Vacation seasons, and some other dynamics in the third quarter. So.
We do think as we mentioned earlier the third quarter should look a lot like the second quarter and that in most years has been the case in our U S business.
We have seen July numbers were here in early August so we have seen in July.
And we're very pleased with the trends that we saw throughout the second quarter continuing into July.
And so there is nothing that we would highlight for the third quarter. No reasons, we have to think that it should be any different than the second quarter.
And have a lot of confidence in the guidance revision that we've provided.
Great. Thank you very much.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Debbie Osteen for any closing remarks.
Thank you Andrea.
While we continue to manage through the pandemic.
The mental health crisis is not over.
This pandemic has been a period of tremendous challenges loss and stress.
At the same time.
It has brought greater awareness 2 issues that had not received the prominence they deserve.
There is a growing awareness of mental health and substance use disorders across our country.
Acadia.
We will continue to be a voice for equity in mental health and strong advocates for patients.
To receive the right care in the right setting and at the right time.
We remain ready across our 229 facilities in 40 states to ensure access to high quality care for those that need our help.
I want to thank you again for being with US today and for your interest in Acadia healthcare.
If you have additional questions today, please do not hesitate to contact us directly have a good day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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