Questionable Claims By Acadia Healthcare To City Council Also Provoke Concern For Investors And Consumers

Feb. 13, 2019 12:55 PM ETAcadia Healthcare Company, Inc. (ACHC)1 Like
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Penn Little
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Summary

  • Acadia Healthcare appealed a denial for a 'Special Use Permit' to the Indio, CA city council last Wednesday night.
  • An Acadia Attorney makes multiple questionable claims about the state of the company.
  • On the same night Acadia commits to disallow placing patients "out on the streets," an Acadia patient spent 48 hrs on the streets in Indiana.
  • Morgen Bentsen brings new information predicated on our reports.

On February 6, 2019, we reported that Acadia Healthcare Company's (Nasdaq: NASDAQ:ACHC) Chief Strategy Officer Andy Hanner, Division President Robert Marsh, and the company's attorney, Samuel Alhadeff (Partner at Lewis, Brisbois, Bisgaard & Smith LLP Bio: Alhadeff, Samuel - Lewis Brisbois Bisgaard & Smith LLP), all were present in front of Indo, California's City Council. The appeal sought to gain final approval for a previously-denied Special Use Permit to construct and operate an 80-bed treatment facility.

Up until one week ago, the leaders of Acadia Healthcare Co., Inc. had not entered a public forum since the November 6th, 2018 earnings call. Ironically, on November 6th, a buyout was "weeks away," according to CNBC. Present staff also mentioned shuttering facilities in the U.K. In the 90 days between forums, they've lost two board members, fired the CEO, no buyout has materialized, but they are seeking to open additional facilities.

The proposed hospital in Indio is favored by the community, especially the police because it provides an option for mentally ill lives that may need immediate, often involuntary admission (to care). These types of facilities are far more attractive on a balance sheet than an Instagram page - so communities often put up a fight, known as 'NIMBY' (Not in my backyard). These models require less staffing and provide publicly funded revenue streams which fall under less scrutiny than that from commercial insurers. Acadia attains over three-quarters of its revenue from taxpayer dollars in both countries.

For Indio resident Morgen Bentsen, this started as a NIMBY battle, in which he opposed the central location. However, after acquiring the information we have reported in the last 90 days, his rationale for appeal changed from 'NIMBY' to 'Not Acadia.' He specifically asked for more time and an investigation of the many alleged cases of abuse facing Acadia nationally. Specifically, he mentioned the death of a 5-year old boy at a recently shuttered Acadia facility in Arkansas, an alleged riot, and various lawsuits pending against the company. Despite this new information, the board unanimously approved the project.

THE FACT CHECK

http://indio.granicus.com/player/clip/212?Alhadeff (at podium), Marsh (2nd from left), and Hanner (far left, back). Source: City of Indio, CA.

We watched the video of the hearing and immediately recognized several red flags. These were, for the most part, compressed in the rebuttal to the community by Attorney Alhadeff.

The link to the full video of the hearing may be found here — source: City of Indio, CA.

Mr. Bentsen's testimony can be seen below. His appeal set the stage as the first time that Acadia would be given the opportunity to address questions of patient abuse and financial concerns facing the company.

Bentsen's statement. Source: treatmenTTruths via Vimeo.com.

In response, Mr. Alhadeff stated that these reports weren't accurate, noting that, I, the author of these accounts, was a convicted felon. Moreover, simultaneous to that comment, Division President Robert Marsh grinned quite noticeably. Alhadeff followed this, saying,

"you got a convicted felon's information read into your record, it isn't true, I don't know what to say, it just isn't true."

For the record: I will not refute my felon status, and all information, along with mental health records is and always has been publicly available (including on my company website, for well over a year). I took full responsibility for my actions when I was 23-24 years old, battling the very disorders Acadia purports to treat effectively.

To tangibly evaluate these comments and Marsh's visual response, see the video below:

A relevant portion of Aldaheff's Rebuttal of Concerns by Indio, CA citizens. Source: #treatmenTTruths.

In that video, accompanying Alhadeff's comments and Robert Marsh's grin, are details of a lawsuit in which Mr. Marsh was named as the former supervising officer of the plaintiff, Yvonne Downs. The defendant, the Acadia Subsidiary (Red River Hospital in Wichita Falls, TX) in which they both worked. Acadia was found liable for wrongful termination of Downs, carried out by Marsh, in alleged retaliatory response to her reporting of internal wrongdoing including Medicare fraud. Copies of the complaint and judgment are at the end of the article.

Failure To Keep A Promise

they (Acadia) will not, and have not just put somebody out on the street; that just does not happen.

False: This statement is materially untrue, in fact, on that very night, February 6th, a young teen in Indiana, Chaise Smith (17) was the target of a search after it was discovered at the Acadia-owned facility. A report two days later, dated February 8, 2019, stated that Smith was found on the streets.

https://www.wthitv.com/content/news/-Police-in-Greene-County-search-for-missing-17-year-old-505462531.htmlA Screenshot of the story from WHI-TV10's website. Source WHI-TV.

According to one exclusive with WTVO out of Terre Haute, Indiana, Chaise's Mom;

When you entrust these facilities with your children and their everyday lives and they are getting out, there is something wrong.

For providers, these qualitative troubles, especially the litigation, will generally result in added litigation; as claims pile up - this further adds risk, costs, and ultimately less revenue. The homologized nature of the content shows trending uniformity of allegations as well - across the board at dozens of their 500+ facilities.

Questionable Claim Re: The Sooner State

There was one incident, maybe, in Ada Oklahoma.

False: Two lawsuits are pending in Oklahoma that name Rolling Hills Hospital (an Acadia-owned facility) as a defendant. Both allege patient abuses. One suspect, a patient, was rendered mentally incapacitated after another patient inflicted blunt-force trauma to the plaintiff's head. The other claims a wide range of patient negligence. They are below in a combined PDF.

18

2 Lawsuits in Oklahoma State Court: Source: The State of Oklahoma.

False: Previously reported by us a few weeks ago, Meg Wingerter of Daily Oklahoma reported even more abuses. A report released by Aurelius Value, and shared on Twitter (seen below) mentions 26 deaths went unreported in 2016, at Ada's Rolling Hills Hospital.

This provides evidence of at least three alleged incidents at Rolling Hills alone. Alhadeff failed to even address allegations from other states or countries for that matter. Confidential sources have come forward to us to corroborate allegations in North Carolina, Illinois, Texas, and Arizona alone. On top of that, the U.K. allegations and voluminous pending litigation in other states all serve as a reason to consider this statement untrue.

Define "Well"

Alhadeff stated,

this company is well funded

Debatable: Their interest coverage ratio, is below 3, and they have a negative tangible net worth. Also, according to our previous article, they are allegedly promoting reduced "E.P.O.B." (Employee Per Occupied Bed) levels to boost short-term profits. Both are all critical concerns, given Acadia's recent drop in value (by roughly 30%) in the trailing quarter. Most companies seeking to create funding via cost-cutting, much fewer ones providing healthcare, cannot be considered "well" funded. It would appear fairer to assess they are simply, "funded," at this present moment.

As a corollary, one interesting visual comparison is found in comparing the ACHC 'price to tangible book value ratio' to that of 5 close peers (Tenet Healthcare (THC), Community Health Systems (CYH), Universal Health Services (UHS), AAC Holdings (AAC), and HCA Holdings (HCA)): their abysmal -17.01 output is far outside the bell curve, and way behind the pack.

ChartData by YCharts

Fuzzy Numbers

...(Acadia Facilities) operate around three countries

...of the 586 facilities Acadia operates tonight...

Both False. According to the Acadia Homepage:

Acadia is a provider of behavioral healthcare services. At September 30, 2018, Acadia operated a network of 586 behavioral healthcare facilities with approximately 18,000 beds in 40 states, the United Kingdom and Puerto Rico. Acadia provides behavioral health and addiction services to its patients in a variety of settings, including inpatient psychiatric hospitals, specialty treatment facilities, residential treatment centers and outpatient clinics.

Acadia operates facilities in two countries (the U.S. and the U.K.), not three. Puerto Rico is a U.S. territory that was granted citizenship as well. This island nation became a part of the United States just over 100 years ago.

Acadia has shut down many facilities since September 30, 2018, all before February 6, 2019. Some subsidiaries that Acadia has recently shut down since including Four Circles Recovery Center in North Carolina (passively mentioned in an article and confirmed by multiple confidential sources) as well as all the Ascent Children's facilities in Arkansas. The latter is the Arizona facility, in which the 5-year old boy Bentsen mentioned, died. This incident led to four Acadia employees being sued. We first reported the Ascent incident on November 16.

The story about a death at Ascent Children's Health Services. Source BETNetworks via Youtube.com.

The Vote

https://www.indio.org/your_government/city_clerk/agendas.htmOfficial vote tally screenshot from the video. Source: City of Indio, CA.

However, again, despite Bentsen's new supplication for veracity, the board unanimously approved the initiative.

According to Bentsen:

They didn't let us rebut the rebuttals, and it appeared they already had their minds made up before we went into that hearing.

With earnings season approaching, in just 2 weeks' time, they've definitely made some changes with new CEO Debra Osteen on-board. It would appear that at some point some clearer answers will be warranted. The quantitative angle appears bleak, however, the qualitative angle doesn't appear to do much to contradict it. Then, at the end of the day, is anyone worried about the many children in their corporate custody separated from their families?

--------------

Appendix:

We are providing copies of the Red River Lawsuit and Jury Verdict so readers can view the incident involving Division President Robert Marsh.

Complaint Below:

Case 7:13-cv-00129-O Document 4 Filed 10/17/13     Page 1 of 15 PageID 19
115

Jury Verdict:

Case 7:13-cv-00129-O Document 85 Filed 12/17/14    Page 1 of 12 PageID 834
112

We have left messages for all parties including Marsh, Acadia Healthcare, and Alhadeff. We have not heard back yet but will update the article if we get any responses back.

This article was written by

Penn Little profile picture
224 Followers
Penn Little is an entrepreneur, researcher, investor, writer, and investigative journalist. Hailing from the small town of Springer, Oklahoma, Penn first began "investing" in the 5th grade, when his group won the 3rd place in a Dallas Morning News-sponsored stock picking contest. Penn has found a passion in his ability to expeditiously investigate companies as well as piecing together how they all contribute or are affected by multi-faceted macro trends. The dual understanding of finance and behavioral health led to the notable Acadia Healthcare series of articles in 2018/2019.He began working for a behavioral healthcare provider, Prescott House, Inc. in 2011. This was a result of his recovery from after struggling with behavioral health disorders and the consequences of his maladaptive behaviors resulting from unresolved trauma. Succumbing to these taught what he says are "the best lessons I ever learned." While not related to securities, Penn served 14-months in federal prison, for bank fraud when he was 23-years-old. He was ordered to pay around $300k in restitution, and while it took him eight years to do so, he settled the bill in 2016. While in graduate school, in his resurgence from the time of tough lessons: Penn became a partner in a start-up management consulting firm, beginning in 2013. Peak Consulting Partners focused on healthcare management and finance. A large non-profit acquired the firm in 2016, and it still thrives today, despite Penn moving on to his passion: investing. Now, a decade later, Penn has exited three start-ups. Before founding Bar Nothin' Capital Management, and then his research firm Bar  Penn was the Co-founder and Managing Partner of Crestview Capital Partners LLC. At Crestview, the firm he co-founded in 2014, Penn led the charge to improve outcomes in mental and behavioral healthcare by scaling quality care models in the arena of community counseling. He sold the company in 2017 to a global private equity firm. Penn serves as a contributor for Forbes as well. He has come to enjoy and find a passion for learning and writing about various verticles including energy and transportation.Penn is a proud graduate of Culver Military Academy in Culver, Indiana. Penn holds a B.A. from The University of Oklahoma in Norman, Oklahoma, where he studied Economics. He holds an M.B.A. in Finance from the University of Arizona's Eller College of Management in Tucson, AZ.Penn founded the Wilkinson-Dorrell Scholarship Program at The University of Oklahoma Foundation. While at Crestview, Penn also co-founded the Shatter Our Silence Initiative, to combat teen suicide in Northern Illinois. Penn loves to spend time with his nieces, Sacra and Emory (both 3) and nephew, Greer (1), as well as fishing in Kona, HI for Blue Marlin. He tries to keep his golf game in shape and is a loyal fan of his alma mater's Oklahoma Sooner football team.Disclosure: Katie Mikles (SeekingAlpha Contributor) and I are colleagues and partners from a journalistic and entrepreneurial standpoint as well as personal friends. We collaborate and research together, as many readers know, however, are expressing our own unique investment viewpoints.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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