While headlines focus on Acadia Healthcare's bed expansion strategy and its performance in the opioid treatment market, a subtle shift in their narrative reveals a potentially more potent engine for future growth: **partial hospitalization programs (PHPs) and intensive outpatient programs (IOPs).**

Both the Q4 2023 and Q1 2024 transcripts highlight Acadia's intentional emphasis on extending the continuum of care, with PHPs and IOPs acting as critical step-down therapies for both their Acute and Specialty patients. The significance? Acadia is recognizing the long-term value of these programs – not just for improving clinical outcomes, but also for enhancing patient experience and driving revenue.

Why This Might Be Flying Under the Radar

Here's why this shift might be flying under the radar of many analysts:

**Stealthy Expansion:** Acadia added 39 outpatient programs in 2023 and 15 in Q1 2024 alone. This quiet build-out is strategically placed near their acute and specialty facilities, creating a natural flow of patients within the Acadia ecosystem.

**Untapped Potential:** The transcripts reveal that only a "portion" of clinically eligible patients are currently stepping down to PHP/IOP care. This signifies a massive untapped market within Acadia's existing patient base. By increasing utilization, Acadia can unlock significant revenue and margin expansion.

**Clinical Differentiation:** PHPs and IOPs are increasingly seen as critical for long-term patient success, especially for complex diagnoses like OUD. Acadia's emphasis on these programs, coupled with their focus on technology-driven patient monitoring, can create a powerful differentiation factor. This could lead to stronger payer relationships, potentially commanding higher reimbursement rates.

**Strategic Alignment:** The OIG report cited in the Q1 transcript underscores the immense need for behavioral health providers who serve Medicare and Medicaid beneficiaries. PHPs and IOPs are cost-effective alternatives to inpatient stays, making them particularly relevant for these populations. Acadia's proactive development of these programs positions them to capitalize on this growing need.

**Synergistic Growth:** Consider the case of OUD patients, where 70% also present with underlying mental health diagnoses. PHPs and IOPs create a natural bridge for cross-referrals within Acadia's service lines, potentially driving revenue synergies across the board.

Hypothetical Scenario: Unlocking the Potential of PHPs

Let's assume Acadia increases the utilization rate of PHP/IOP services among eligible patients from the current "portion" to 50% within the next two years. Considering their existing patient base, this could translate to thousands of additional PHP/IOP patient days annually. Even with conservative pricing assumptions, this could add tens of millions of dollars to their top line, with a potential for significantly higher EBITDA contribution given the lower operating costs of outpatient programs.

Outpatient Program Growth

While bed expansion and OUD treatment are vital components of Acadia's growth story, their strategic emphasis on PHPs and IOPs reveals a potentially underestimated driver of value. This focus on extending the continuum of care not only strengthens their clinical model, but also creates a powerful platform for future financial performance. Keep an eye on this silent weapon – it might just be Acadia's most potent force in the years to come.

"Fun Fact: Did you know that Acadia's network of facilities is larger than the number of Starbucks locations in the entire state of California?"