Behavioral Health Composite

June, 2019

Behavioral Healthcare Stocks down 0.5% in June

The Behavioral Health Composite, which tracks investor interest in the three public behavioral healthcare companies – Acadia Healthcare (ACHC), American Addiction Centers (AAC), and Universal Health Services (UHS) – was down 0.5% for the month of June. The S&P 500, by comparison, was up 7.2% during the same period.  “We’re seeing some strength from UHS and ACHC, coming off their May lows, while AAC continues to struggle,” said Kevin Taggart, Managing Partner at Mertz Taggart.

The BHC index was slightly down after many down months.

  • American Addiction Centers – AAC (↓14.9%) continues to struggle in the month of June.  AAC’s second in command, President and COO, Michael Nanko, resigned in mid-June, just weeks after unveiling a new 10-year vision for the company.  Nanko will receive over $185,000, paid out over the next four months.
  • Acadia Healthcare – ACHC (↑5.9%) rose nicely in June after a down May. In late June, the company announced that the COO, Ron Fincher, is leaving the company, effective July 15.  He will be replaced with Acadia’s Eastern Group president, John Hollingsworth.  Fincher’s exit is the latest shake-up of Acadia’s leadership, which started in December after its board voted to oust Joey Jacobs, the company’s longtime chairman and CEO, in an unusual weekend vote.  Since then, Acadia President Brent Turner left the company and Acadia board member Christopher Gordon resigned.  Fincher will receive a cash payment of $1.2 million as part of a separation agreement.
  • Universal Health Services – UHS (↑7.4%) rose steadily throughout the month of June on no news.  Perhaps we’ve seen a bottom here.
graph displaying data for january health composite

For the last twelve months (LTM), the BHC well behind the S&P 500 at a -29.7% loss relative to the S&P’s gain of 7.9%. 

graph displaying data for january health composite

Valuation – Public Comps

Below are the Enterprise Value / EBITDA and Enterprise Value / Revenue ratios for AAC, ACHC and UHS.  The valuations provide a relative barometer for what smaller companies can expect.  Given the higher relative risk of smaller companies (e.g., less liquidity, smaller revenue base), we typically (though not always) see multiples that are lower than those of the public companies. 

Stock Prices

Company 6/30/19
AAC $0.86
ACHC $34.95
UHS $130.39

Enterprise Value/EBITDA

Company 6/30/17 6/30/18 6/30/19
AAC 12.68x 12.04x N/A
ACHC 12.98x 11.54x 12.32x
UHS 9.23x 8.44x 9.44x

Enterprise Value/Revenue

Company 6/30/17 6/30/18 6/30/19
AAC 1.31x 1.80x 1.42x
ACHC 2.64x 2.35x 2.29x
UHS 1.58x 1.30x 1.47x

M&A News

June 20, 2019 – Kolmac Outpatient Recovery Centers (“Kolmac”) announced the acquisition of BioCare Recovery (“BioCare”).  Headquartered in Yardley, PA, BioCare has provided outpatient addiction treatment in the form of medication-assisted treatment (MAT) and individual therapy for the past five years.  Kolmac is a network of intensive outpatient (IOP) addiction treatment centers in Washington D.C. and Maryland.  The acquisition of BioCare marks the beginning of Kolmac’s expansion into other states and communities.     

June 19, 2019 – The Stepping Stones Group, a national provider of therapeutic and behavioral health services for children in kindergarten through 12th grade, announced the acquisition of StaffRehab, a California-based provider of therapy, nursing and behavioral health services for children with autism and special needs in school settings.  StaffRehab will operate as a subsidiary of Stepping Stones in the company’s west region, and a pair of executives will transition to new positions in the deal.

June 18, 2019 –  AppleGate Recovery, a BayMark Health Services company, announced the acquisition of A.M.C. Nashville, an office-based opioid treatment (OBOT) program in Nashville, Tennessee. The facility, established in 2011, provides buprenorphine and Suboxone medication-assisted treatment with counseling in a physician’s office setting.  AppleGate Recovery now operates 13 programs across 6 states that focus on outpatient treatment with buprenorphine and buprenorphine compounds.

June 14, 2019 –  Florida-based trauma center, Next Chapter (“NC”) Treatment Center has announced its merger with All Points North (“APN”) Lodge, the country’s newest comprehensive health and wellness center, with a special focus on substance abuse and addiction. Beginning October 2019, NC’s clinical care services will relocate to the APN Lodge campus in Edwards, CO as a part of APN Lodge’s larger continuum of care.

June 11, 2019 –  Newport Academy, a series of adolescent and young adult treatment centers specializing in mental health, trauma, eating disorders, and substance abuse, announced the purchase of Gray Wolf Ranch in Washington state.  Founded in 1996, Gray Wolf Ranch has treated more than 1,500 young men with substance use and co-occurring mental health disorders.  Gray Wolf is now a part of Newport Academy’s growing network of treatment centers across the country, with locations in Northern and Southern California, Connecticut, Pennsylvania, and Maryland.

June 10, 2019 – Consolidated Care Inc. (“CCI”) announced that it will be acquired by TCN Behavioral Health Services (“TCN”), effective July 1, 2019.  TCN is a not-for-profit agency that has provided adult and youth services in Greene County and the surrounding area for more than 25 years. It has locations in Xenia, Fairborn and Kettering.  The merger of the two agencies will allow for an expansion of behavioral health services.