Acadia Healthcare Company, Inc. (ACHC) Earnings Call Transcript & Summary

Okay. We're going to get started with our next panel. I'm Scott Fidel. I'm the health care services analyst with Stephens. We're really pleased to have Acadia Healthcare with us for the next panel. Here from the company, to my right, we have both Chris Hunter, the CEO; and Heather Dixon, the CFO. And then to my left here, we've got Patrick Feeley, who is Senior Vice President of Investor Relations. So first of all, I want to welcome you all back to our conference. It's great to see you all here. And I know there's really nothing to talk about, so we could probably just finish up the conversation now.

Be quick.

Okay. So with that said, why don't we just sort of get right into things. But Chris, I did want to sort of just maybe start with just sort of giving you an opportunity just to sort of set the table here in terms of just some general observations on sort of where things stand. Obviously, we'll drill into everything with -- in the Q&A. But any high-level points you want to make around the business, around just the environment right now. And then as we're looking out into 2025, just some sort of summary comments, and then we can -- we'll sort of drill into every bit.

Yes, I would just start at a high level with -- obviously, we think that there's a lot of bipartisan support for mental health in this country. We've been watching the election closely, and we continue to think that there continues to be record demand for our services across the board. Obviously, we'll spend some time unpacking a number of things that I know everyone wants to talk about, but just in terms of our continued ability to execute on the business, the opportunities that we're seeing with our joint venture partners, these bed additions that are coming at a record level, I think our ability to navigate what has been previously a tough labor market well. I think that our thoughts on reimbursement. All these things, I think, are really coming together for us. And we'll talk, obviously, a little bit about volumes as well, which I know is a key question.

All right. Great. And yes, we'll definitely get into all those business trends. And -- but I did want to -- I've been trying to just with each of the companies sort of start out the conversation given the timing just around the elections and sort of thinking through the implications for each of the health care services companies and then their end market focus. Clearly, we're coming off of a backdrop where overall funding levels have been strong overall in terms of reimbursement for behavioral services certainly on the Medicaid sort of side as well. We've had nice funding. But as you said, there's bipartisan support. Certainly, for providing access and funding for mental health services. We're getting some visibility now into some of the staffing. Suggestions for the President, not entirely surprising. It's some unconventional type of picks. And so whether it's just from sort of the policy side of things in terms of what you're focusing on, or any observations you could give on some of the nominations. RFK Junior, I think, does have -- this is an area that he is quite interested in, in terms of mental health. So that's obviously a dynamic. Actually, Medicare Advantage stocks are running today a bit actually on Dr. Oz having been supportive of [ MA ] in the past. So there's certainly nuances here already start to parse through. So whether it's from the policy or from the staffing, any perspectives you want to provide on what you're seeing so far?

Yes. I mean it's clearly a hot topic. I think there's just a couple of things I would say at the outset. I think there clearly has been a lot of early speculation about how the new administration and certainly with Republican control of Congress, how that might impact health care broadly. But in our case, behavioral health, a couple of things. I'd say we talk to policy experts all the time, and they make the point that we've already been through a prior Trump administration. Back then repeal and replace the Affordable Care Act, obviously, was a real area of emphasis. And despite that, we really didn't see any rollback of coverage during those years. And in fact, the country continued to see pretty significant expansion of coverage during that time. Clearly, there are other issues that are going to be top of mind from this administration beyond health care right now. And so there just doesn't seem to be the same level relative to the first Trump administration to focus on health policy. That said, we at Acadia, continue to treat some of the most high acuity patients in the country that are just dealing with some of the most severe mental health care challenges. And there has been historically kind of a recognition that those patients are less likely to be impacted by broader changes in health policy. So as an example, I don't think that the inpatient psychiatric industry even saw a material benefit from the Affordable Care Act, and certainly not anywhere near the benefit of some of the other subsectors that were experienced. So even if we were to see some changes in coverage, I don't think the behavioral health industry would really see material consequences from that. And then as it relates to individual nominees, I mean we're obviously tracking it very closely did know that Dr. Oz has quite a history of supporting mental health, which is exciting and something that we'll just continue to track as the -- as we move towards confirmation hearings.

Great. And I would totally agree with you on the coverage side and around some of the exchange nuances that have been a big area of focus. But when we think about the population you serve, it's -- I think, ultimately, these are people that are going to be covered whether it's in Medicaid, or it's in the exchanges, I would agree with you there. The other area that is going to get a lot of focus is just around the supplemental payments on the Medicaid side. It's important to note that these programs, these largely the funding sort of momentum started under the Trump administration. So it's not as black and white as sort of red bad for Medicaid and blue good. It's -- there's been a lot of bipartisan support and at the state level as well with a lot of the red state governors pushing those. But on that sort of hot button topic that has been a big focus for investors. Any framing that you want to sort of provide around that and how you think about the sustainability and, I guess, trajectory of some of the supplemental payment programs continuing under the next administration.

Yes, sure. I think it's a fair question. And I would start by just saying Medicaid sub programs literally go back decades. They've been around for a really long time, and we would certainly expect that to continue into the future. States have historically designed these programs to help on their existing Medicaid programs and certainly to help pull in federal matching dollars into the state. Once they're in place, you just typically don't see these programs going away. And so they've largely grown throughout time, throughout the decades, irregardless of which party was in power. And I think just based on some of the conversations we've had with people who are a lot closer to it in Washington, most seem to think that these programs are likely to continue. I would say states have been a little more active over the last several years in improving Medicaid reimbursement, and they've done that in part by leveraging Medicaid sub programs. Behavioral health historically has not benefited from these programs to the same degree as MedSurg facilities have, and we've seen that start to change in recent years. And so states have been either creating new supplemental programs or in some cases, they're including inpatient behavioral health facilities in their existing supplemental programs in a more meaningful way as a means of improving funding for the industry. And so we've seen the benefit of both of these dynamics. And as I said, I just think we continue to expect to see that moving forward.

Okay. Great. Well, I want to move on to talking about the business, but maybe -- and I know we have a full group here, so definitely want to provide plenty of opportunities for people to ask questions. Just on the election sort of macro topic, any questions there. Obviously, we have other opportunities to ask questions, but just if anybody did have one on that before we move on. Okay. Great. So why don't we sort of shift over maybe to getting update to the extent we can just on the business. Obviously, it is a fluid sort of dynamic environment right now given some of the some of the dynamics playing out around Acadia. To the extent that you would be comfortable, I do think it would be helpful if trying to get visibility into some of these trends. If you can give us an update on from the patient day growth perspective, from the volume perspective across the same-store portfolio, maybe sort of bring us up to speed in terms of what you've been observing relative to the last update that you would have given us, which would have been around the third quarter report.

Sure. Sure. So I'll take that. I can appreciate that is a big question, and we're discussing things quite a bit. We've given more visibility into some of even the quarter or intra-quarter data as we've gone throughout the year. But we're only halfway through November. It's been a couple of weeks since to your point, Scott, we spoke last. And we're not going to give any intra-quarter or certainly intra-month updates as we are here. So my comments will reflect what we discussed with our quarterly call a few weeks ago. So just to make that clear. As we came into the second half of the year, as you all know, we were expecting same facility patient day growth in the mid-single-digit range and expecting acceleration in the back half of the year. We felt really good about our third quarter results. We saw same facility patient day growth that was at 4.7% for the quarter. And then we actually also provided the September number, and that was over 5%. So we saw the acceleration. We saw exactly what we thought we would see and felt really good about the end of the quarter. But as you guys know, in October, we did see some moderation in the volume growth. That same facility patient day growth for October was right around 3%. And that's about 200 or 300 basis points below what we would have anticipated heading into the fourth quarter. So that's something that we discussed on the call and reflecting back on that. As you recall, we attributed that largely to headlines and media that's national and local, that we had been on the receiving end of following the government investigation announcement that came right towards the end of September, and that's really what we focused on. So maybe if I just step back there and just walk through the timeline of the succession of events that could be helpful. And I hope you understand why we believe that this is largely transitory or temporary in nature. As we stated on the call, just to help you think through how we're thinking through it. So first, obviously, there was an article right at the beginning of September around September 1st that came out, we -- despite that article, we just didn't really see the impact to September. As I stated, September was strong with 5% same facility patient day growth. I think there was a function of a few things. The first is that we were able to get ahead of that article. We obviously had some idea that it was coming. We were interacting. We had some conversations. So we were able to really get ahead of it and have some really good conversations and make sure that were ahead of it. Second, I would say people that are close to this industry, and I think many of you are understand sort of the misleading nature of the article. So people were able to read that and understand and understand the industry in general. And finally, as Chris has said, and we always say, the health care is local. And so a national reporting trend is not as impactful for local facilities. It's the local reporting trends that tend to have a bit more of an impact. So then at the end of September, obviously, we had more news. We became the subject of a government investigation and that is obviously something that we would not have had advanced notice of. And so following that announcement, we did see an uptick in the local media reporting associated with some of these things, and that did have more of an impact to certain facilities because of the local nature of health care again. So we did see the moderation in volume growth, and it was across both our specialty and acute business and saw that impact in October, as we discussed on the call. On the acute side, we saw it really reflected in referral volumes that were impacted and that lower growth in the referral volumes. And on the specialty side, it's a little different. That's a consumer-driven business. It's largely B2C. And so we saw some of the impact there, family member and individual is searching for a place to go for care and some of those local news articles can have an impact. So that's really what we saw is the impact of those 2 things.

Okay. Thanks for that update, Heather. Sort of sticking around, I was hoping and understand and respect the sort of the limitations on providing sort of an intra-quarter update on volumes. But certainly, I'm sure that you've been -- the company and the whole team has been quite active around outreach and solidifying, stabilizing referral type relationships. And I guess, to sort of start with maybe if you can bring us up to speed in terms of through this timeline, maybe walk us through the different referral sources where there seems to maybe be the most pressure that you may be seeing around referral sources, and how that's informing your approach towards counteracting that with communication data initiatives that may be underway to reassure your referral sources.

Sure. And I'll start, and I'll just maybe put a little bit of a finer point on some of the things that I just said. And then Chris, you can certainly speak very specifically to some of the things that we're doing on the ground. But we have not put a timeframe on it. Again, it's only been a couple of weeks since we last spoke to you. But certainly, we do believe that this is a transitory issue for us and think that we can give you some examples here in a couple of minutes that will give you an idea of how this is really reflected on the ground and the actions that we're taking. So again, just to repeat, first article beginning of September, we did not see really any notable impact as a result of that article, and I believe that's very largely due to what we were able to do with our partners on the ground that Chris will talk about in a little more detail in a minute. And we think that was our ability to get in front of the situation, and it was our ability to engage with them with some really meaningful dialogue. We leveraged largely for the conversations, a lot of the content that's included in our setting the record straight information that we put on our website, if you haven't seen that, I would encourage you to go have a look at the setting the record straight document that we have out there, it's very helpful. I think it will be helpful to you. It was certainly very helpful in these conversations with referral sources and local teams, local partners as we had through the conversations and went through that. We had success with those facilities. I've mentioned that there is a local element to some of the reporting, certainly. That was very helpful to get in front of those local partners and more broadly, across the board. What I would remind you is that we have thousands of referral sources, mostly again on the acute side versus the specialty side of the house. I wouldn't read too much into Chris' comments as he's taking you through some examples because this is certainly something that we're very focused on. And that we are continuing to just really have a sustained effort around working with these. But we have seen success. We've seen success at the local level, and that's what gives us confidence that we're going to make progress on this.

Yes. So just a couple of quick examples that I would say health care is local. So to the extent that there have been outreach and focus, we have encouraged our business development resources to have even more touch points with our referral sources during this time. And we have found that when they were able to spend time ideally in person, but certainly more touch points via phone that those conversations go really well. I think those that are closest to our customers that are patients that know our business. They know the acuity of the patients that we're serving. They know the quality of care that we're providing. Those conversations go well. There have been situations where we have done luncheons with certain referral sources. We've taken them through all the work that we did on the setting the record straight materials. And we've certainly seen instances where as soon as we do those, we see an uptick in referral patterns. But it isn't always immediate. Sometimes it takes a little bit of time, and that's why we're being very deliberate in the way that we attack these going forward. I think there are also instances where our BD teams are kind of expanding the kind of the catchment areas a little further out from the facilities as well. And so there's just a number of strategies that we've been putting in place as a group. I think on the joint venture partner front, obviously, we have 21 joint venture partners. These are always great sources of referrals for us. We have a number -- half of those, 11 of those facilities are operational. We'll soon open a couple more JVs with Henry Ford in Detroit and Intermountain in Colorado in the month of December. And so our ability to get out and talk to these JV partners, those that are operational, they see the great work that we're doing with patients all the time because we have an operational facility. But we've also been very intentional about talking to those partners where we may be under construction, or we may be building a site together in the future. And so I think some of the things that I have heard in sitting down and talking to these JV partners one-on-one or in smaller groups with clinicians is that they clearly recognize the transformation that we're taking the industry through. They clearly recognize the magnitude of the investments that we've made on the quality side, the investments that we've made in expanding our quality team, we talk through the IT investments with the EMR, the remote patient monitoring. I would say all of that is always well received. I can tell you there are also instances where we sit down to talk to them about our commitment to clinical, and they're setting the record straight. And they say, look, we work with you all the time. We don't need to spend more time talking about this. Let's talk about the next facility or the next idea that we have to further expand access because there are so many people in their markets that need services. So I think, overall, these discussions have been overwhelmingly positive. I think the more that we can do them in person the better. But this isn't just a onetime thing. We're going to continue to be very, very intentional with these referral sources moving forward.

Well, definitely appreciate the substance around the JVs. That was going to be my next question actually to drill into that. And you largely already just answered that for the most part. I guess, the one sort of follow-up I have just on the JV side would be, I guess, one sort of, because you talked about the existing relationships, obviously, they have a real-time sort of view on everything and they can gauge themselves. And then you're having these, sounds like active ongoing dialogue with your sort of in-flight JV partners where you're in process, I guess the one other piece, maybe if you could update us on would be the pipeline. And to the extent where you've been having traction, how are you, I guess, proactively trying to get in front of that those communications? And are you seeing any types of impacts on that pipeline as a result of the -- I guess, the macro coverage?

Yes. No, very fair question. We've been very proactive in terms of talking to everyone in our pipeline with respect to JV partners. And I think, again, for those that know us best, we have done multiple facilities with a number of these high-profile health systems. So we're building our second facility with Geisinger, that's public. We're building a second facility with Ascension that will open in Austin, Texas, that's public. There are a number of others that are continuously coming to us, and we're talking about building additional facilities as well. But then there are also markets where we want to grow, where we think are underbedded that have really favorable characteristics that it would make sense to potentially have a JV partner, and we're working those into the pipeline every day. Those conversations, obviously, with the media backdrop require an extra level of discussion because they don't know us as well. And so we take them through a lot of the things that our existing JV partners already know in terms of quality, IT investments, et cetera. And I would say those are going extremely well. I think when you have 21 joint venture partnerships, and these are the cream of the crop in health care, we are very referenceable. And so frequently, these JV partners or prospective partners are talking to each other without even talking to us. And I think that has proven to be highly advantageous as well. So we have been able to leverage that with great success, and we continue to feel very, very good about the pipeline. Not only on the JV front, but also on the de novo front and obviously looking at M&A and bed additions as well. But that's all I would add. Anything else you want to comment on the JV front?

Great. And one other contingency I wanted to address around, I guess, this theme would be that the payers. Obviously, Chris and Heather both of you have extensive sort of career experience in that area. I guess sort of in sort of thinking about, I guess, to use the Rahm Emanuel sort of "Never let a good opportunity to go to waste." I'm just sort of thinking about from the payer perspective, given -- I mean, you've provided this data, right, that shows that your length of stay is effectively right in line with the industry average on a macro level. Obviously, payers are always sort of looking though to -- that's been a long-term sort of structural effort by payers to drive down length of stay. Are you seeing any efforts by payers, I guess, to sort of capitalize on some of the headlines, the media coverage around length of data to try to sort of change, I guess, the timing around that or just any other I guess, sort of engagement from the payers that's manifesting itself just around some of these macro coverage.

Sure. Yes, let me start and just answer that a little bit broadly because I think this is one of the key points that we had in the setting the record straight. Just as a behavioral health facility provider, I mean, we are routinely subject to oversight and inspection by all sorts of agencies to ensure compliance, regulatory requirements, robust CMS guidelines on all aspects of our care of documentation and billing as well. I would say, over just the last 5 years, our facilities have been subject to routine inspections to surveys by independent third parties, government agencies, such as the Joint Commission, CMS and so many state agencies. An average per hospital per year of over 5 visits for each one of our facilities. So that's something that just is a regular part of the way that we're conducting operations. On the payer side, specifically, our facilities are always subject to third-party audits and chart reviews, and we welcome payers coming in all the time. They are regularly in our facilities, and we think that, that's a really important part of their role after patient stays. And we have really active dialogue with all of our payers, and we'll continue to do that. I think the other thing I would point out is we have had many strategic conversations with payers about these investments that we're making in IT and in clinical health outcomes because we are making these because over time, we believe that a key part of our strategy will be able -- will be us being able to differentiate on the strength of our clinical health outcomes. And while this is not a part of health care that is moving to value-based care yet, we think that, that day will come. And so we have had all sorts of really productive conversations with our payer partners about the data that we're collecting. What are some of the data points that they would like for us to collect? How can we work more collaboratively. How can we share data across the population. And I would say that those conversations have been very, very productive and more strategic versus just transactional. And I think that, that's just been very encouraging over the last year, and that continues as well. So we just -- we welcome the payer collaborations, and that is very much always been in place and will continue into the future.

Okay. I had one other question around this topic, and then we'll try to move on, but I'll -- and then give an opportunity if there's questions. Just around, I know you can't talk about the specific cases, so I'm not going to ask you about that. But maybe just sort of approaching this more from the prism of the recent media reporting and give you an opportunity to sort of provide your perspective on that? And in particular, if there's any nuance you think that has been missing for some of this recent media coverage or key points that you'd like to highlight maybe around.

Yes. No, I really appreciate the opportunity to do that. I mean I would just start by just stating our mission. We talk about this in our Town Halls with our employees all the time. But I mean our mission is to provide compassionate care that improves lives, inspires hope and elevates communities. And when you really think about the patient populations that we serve in behavioral health as well as in addiction treatment centers, I mean these are some of the nation's most acute, at-risk and underserved patients overall. So our company plays an incredibly important role in supporting these patients, and we just take that role really seriously. So I think that makes some of the media reports that frequently are inaccurate about the care at our facilities disappointing. So a few things that we pointed out and setting the record straight, and I would certainly encourage those of you that haven't actually seen that site, we'll give you the web link here in a second. But a few points that I would just make from the outset on that. I think first is that medical necessity drives patient care decisions at Acadia. And so our decisions are made by license providers, and they adhere to all the associated legal requirements. And I just think that's incredibly important as a company. The allegation Scott that you referred to about holding patients longer than medically necessary is just incorrect. It goes directly against everything we do, and what we stand for related to patient care. The website where we have our very detailed response for those of you that haven't seen it, it's quality.acadiahealthcare.com, and we just really encourage you to go there. You will see the data that we have published that shows the average length of stay at our Acadia hospitals that are, in fact, in line, if not below the industry average. So there's a lot of really good detail there. And then just the second point again, just the level of regulatory oversight that I spoke to before, I just think is incredibly important in our industry overall. So I just -- I feel like our clinicians, they follow industry standard, clinically driven admission and discharge criteria, and we just continue to hold ourselves to a very high standard. That's what I would want others to take away. And we obviously don't have time to get into all the depth that we put in the note on our site. But I think there's a lot of really good data there as well.

Okay. Thanks, Chris. So that's sort of the questions I had around this. And obviously, there's a lot more to your business and your outlook. So I was going to plan to move on, but I did want to pause and see if there's any questions at this point. Okay. All right. Well, let's -- why don't we pivot. I think we sort of got some good substance there around that discussion. Maybe just to sort of just where we sit right now in the fourth quarter and understand not asking you for intra-quarter volumes, but maybe just sort of remind us around sort of the normal seasonality of the business in the fourth quarter, what you typically expect across your key service lines. And then if there's anything just to ensure that we're not missing anything, any call out that you have made or want to make just around things to consider around this particular year that, for any reason, would be different than other years?

Yes, sure. So you're right, we do typically see some seasonality at this time of year, particularly with our voluntary programs, inpatient programs that are voluntary as opposed to the involuntary programs, where we see generally lower volumes in the holiday season as patients or their families seek to -- take them out of treatment, bring them home either for the holidays or when school is out. So we see that, that's normal. We expect that every year. Of course, it's baked into our guidance because it is just part of the normal seasonality. But nothing else to point out, nothing unusual about this year.

Okay. And then maybe just shifting over to the labor side. I guess, one, just update on hiring and retention dynamics. I guess to the extent that if there's been any sort of impacts from the current dynamics around hiring or retention, if you wanted to call that out. So that would be the first part. And then on the wage side, you guys have settled into this sort of sub-5% type of frame now for a number of quarters, having moved that down from substantially higher over the last couple of years. Where do you think we sit right now sort of exiting the year around that wage trend and sort of any preliminary view on what to expect in 2025 on the wage inflation front.

Yes, sure. So I'll take that one. I would say, first of all, we just haven't seen any material impact on hiring or retention following the new cycle. This is something that we have been laser focused on for a long time as a company, particularly knowing heading into this year that we were going to stand up 1,200 beds inside of a year, which is by far an all-time record for the company. So our ability to staff them to be able to continue to attract talent into the company is as important as it has ever been. We have put together a number of employee engagement surveys that we hadn't previously done at the company that has given us a lot of insights. And overall, I think have done a really good job of listening to our employees, but also talking to them about how these investments that we have been making in technology and patient safety and quality and even staff safety, how that all applies to them. And I think that has been really well received. Many of you would be surprised if you went to a behavioral health facility, not one of our facilities in the industry, and how much work is still done on paper and paper charts. I think that is a real differentiator to come to Acadia as we're moving the company to EHRs. We're investing in remote patient monitoring. We're investing in these staff safety devices, and just overall, some of the quality dashboard work that we put in place, licensing the joint commissions software. That's exciting to patients because they don't see that to prospective employees because they don't see that very frequently. And I think we also, whenever there is an opportunity, we're adding beds to an existing facility or we're opening a facility with a JV partner. We're really intentional about doing job fairs, letting prospective employees come in toward the facility, seeing these investments that we've made across the board, and these are state-of-the-art facilities that -- we have found that people are really drawn to new builds. And so that has been -- we've been very successful in working with our JV partners in particular, in making that happen and just really showcasing these new expansions that we've had. I would say just overall in terms of labor costs, we have expected underlying wage inflation to remain under 5% throughout the year that clearly has come down from the high watermark in the fourth quarter of 2022. And that's exactly what we've seen. So Heather would nudge me given that we have not given guidance yet. We're still 3 months away from doing that. So I'm going to stop short of giving guidance. But just the trends overall over the past year, we would say, have been encouraging. And so we're optimistic overall that we can continue to sustain that into the next year as well.

Okay. Maybe we'll toggle over to just the expansion and capacity increases. Chris, as you mentioned, you've guided for 1,200 total bed adds for 2024 on a full year basis and the fourth quarter is a signature sort of period for that, I think, around roughly 700 beds, right, targeted to be added in the fourth quarter. So one, can you comment on sort of how you were facing around that 700 beds coming online? Is everything on track there? And then anything you want to call out relative to the larger, even larger pipeline of around 2,000 beds looking out, I know you've got several facilities targeted for implementation in the first half of 2025. Maybe an update on sort of how those are going relative to the timelines.

Yes, sure. I'd love to talk about it. Really excited about these bed additions and the new facilities. They are -- Chris has mentioned, state-of-the-art facilities, they're beautiful facilities. And so our employees are excited about them prospective and current, and we're excited about them. We have the opportunity to go and see them, and they really are an exciting part of what's coming up here in the fourth quarter. That said, we have work to do. You're right. You're correct. We have over 2,000 beds under construction right now, and that obviously includes beds that we'll be opening in the fourth quarter of '24 as well as some of the facilities and beds that we'll be bringing on board during 2025 just because of the lead time to build. When I think about the cadence of that, you're also correct that there is a large portion of those that are weighted towards the fourth quarter. We've been anticipating that. We've messaged it all year. We knew that was coming. And so those are coming online. A couple Chris has mentioned that we're super-excited about are a couple of the JV facilities that are larger facilities, including one in Madison, Wisconsin and also one in the Detroit area, one in -- with Intermountain Health in the Denver area, so some really sort of banner facilities that are coming online, and we're really excited about those.

Okay. Great. And I wanted to ask on the other side around just bed reductions, portfolio rationalizations. And I wanted to start with maybe just also just asking more from like a guidance methodology type perspective because that's definitely one area where we have externally pretty low visibility, right, in terms of predicting some of those. And I know you're always doing sort of ongoing portfolio reviews. But have you thought at all about maybe even sort of when you get into like the annual guidance, and I don't know if this needs to be updated constantly, but keeping us on track where like you guys gave us a lot of detail on sort of the bed adds and the timing of that. Also thinking about maybe giving us sort of some of those bed reductions or sort of a placeholder for what you think about sort of portfolio rationalization, so that avoids maybe some structural over forecasting of net beds that we can all possibly have in our models because there's definitely, I would say, sort of a lot more disclosure around bed adds relative to bed reduction sort of earlier and sort of in a timeframe. I said another way, a lot of the bed reduction stuff may come sort of on a sort of look-back basis, right, where a lot of the bed adds will be given to us prospectively.

Sure. Why don't I start, and Heather, you can chime in as well. But I would say we've been very consistent that when we're seeing facilities that are underperforming, or we don't see a path to improvement, we're going to take action. So we have 260 facilities, and we've closed 4 this year. And so during the third quarter, we made a decision to close 2 subscale satellite programs that were in 1 of our markets. From a margin standpoint, these were generally operating somewhere around breakeven. So definitely a drag to revenue as they come out of the consolidated run rate, but really not much of an EBITDA impact. And so of the 4 that we've closed this year, we're looking at an impact of 200 to 300 beds. And it's something that just portfolio optimization, I think, is just something that when you're running a facility business that you have to look at consistently. I don't know if you want to speak to guidance or if we're going to bake that in, in the future.

Yes, I could speak to that. I mean, typically, of course, we have not guided to bed closures or facility closures, and there's a really good reason for that. These -- we, in addition to our employee base, see this is an essential service that we're providing in the communities and often in markets, we are in a place where there's significant bed need and already underbedded. So we feel like it's our obligation to do everything we can with these facilities. So while we focus on them and we have constant portfolio reviews at a very granular level for facilities we do everything that we can to really focus on the facilities. That said, we are very cognizant of the impact of those, both from a financial perspective and also just an execution perspective. And when it's time, we will make those hard decisions. So we will try to get visibility where we have it, but certainly it's not something that we would message early in the process because we're really focused on keeping the beds open in the market as long as we can.

Okay. Understood. Probably have time for one more question. So anybody want to take it out there or I'll take it, but I want to make sure no one else. Okay. Well, maybe we could sort of round out just with an update on CapEx and sort of how that's tracking relative to your outlook? And then maybe conceptually, to sort of, I guess, how you're thinking about, obviously, not asking for guidance, but just given the backdrop, right, and obviously, there are may be ongoing costs associated with some of these different areas of scrutiny. How are you thinking about sort of balancing CapEx that you need to or want to deploy to support what remains a very robust growth agenda, while also providing maybe some level of provision on the balance sheet, some level of cushion for other capital needs that may arise as a result of the current environment that Acadia is facing.

Okay. That's a lot to cover. I'll do my best to get through a lot of that. So first, as we look forward to 2025, I'll kind of cover a few broad topics and obviously bolden the conversation on CapEx and certainly on new beds for 2025...

All in 2 minutes, right, Heather?

All in 2 minutes. I'm going, okay. So if I think about 2025 too early for guidance, obviously, just thinking about a few maybe headwinds, tailwinds what we're looking at. And I would just point to 3 things maybe to keep it simple, volume, obviously, pricing and then I'll focus on the start-up cost portion related to the new beds because that is something that we've spent some time talking about, and that will lead into the CapEx conversation. Obviously, with volume, that's a big one. We're all watching that, something we've spent some time talking about here. And we would continue to be watching that, and that's obviously one of the big swing factors. We've said that we believe this is transitory, the moderation that we've seen in Q4. And I would just remind you that we expected to see volume growth of 3% to 4% for fourth quarter. But we now expect to see volume growth and that is 200 to 300 basis points lower than what we would have expected. So that's the first one, that I would point out. Second is pricing. We talked a little bit about some of the Medicaid supplemental payments. We know that we have seen historically going back low to maybe mid-single digits growth in rates annually. And we've seen that in recent years, states have looked for ways to keep ahead of inflation costs and make sure that they're funding these programs that they deem so critical in their communities. And really, we've seen some nice tailwinds from that. We said that at some point, we expect that to revert back to the mean, but we don't think that what's in front of us immediately. We just don't see that likely in the near-term. And then lastly, maybe I'll slow down a little bit to get into your conversation about start-up costs, new builds and CapEx and what we expect to see. Of course, we said we're opening a very large number of beds in 2 consecutive years, and that's a big step up from the prior year. You guys know that we have roughly 1,200 that we have guided to for this year. the bed count there is doubling what we added last year, roughly speaking. So a big step up. And then, obviously, '25, we're also planning to add a similar number of beds. So there is a culmination of a lot of beds, hence the 2,000 beds under construction. If you think about the timing of those as well, the 2024 beds coming on largely, as you noted, towards the end of the year. So effectively, the start-up costs related to a significant amount of the 2024 beds will actually be incurred in 2025. So in 2025, you'll have start-up costs related to '24. And then outpacing of the openings for 2025, as you mentioned, is more moderated and we'll see those coming throughout the year. And certainly, earlier in the year, so we'll see a portion of the start-up costs for 2025 bed adds will also come in 2025. So if you think about '24, we're going to have around $25 million in start-up costs, our expectation for the full year. And I would expect that's going to be roughly double in 2025 because of the succession of events and the timing of the bed openings that I've just walked through. So hopefully that helps you understand how to think about 2025. Following that, we would expect that to taper down because certainly, you're going to have contribution from the beds that are adding and then the ponderance of the large amount of beds will taper of. And then finally, if I think about CapEx, that will largely follow that pattern as well. You will have the CapEx associated with the beds. We're obviously already in flight for a large number of those for again '24 and '25 are already underway. And we would see for that to continue into '25 and certainly the beginning of the year as we open those facilities and then start to taper off towards the back end of the year.

All right. Great. Well, there was a lot of content there. So -- and I think we covered a lot of ground in the last 45 minutes. I want to thank the Acadia team for joining us, and hope you have a great day at the conference. Thanks.

Thanks for having us.

Thank you. Thanks Scott.