Acadia Healthcare Company Inc.
02/27/2026 | Press release | Distributed by Public on 02/27/2026 05:07
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis ofFinancial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as "may," "might," "will," "would," "should," "could" or the negative thereof. Generally, the words "anticipate," "believe," "continue," "expect," "intend," "estimate," "project," "plan" and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, the following:
•
the impact of internal or governmental investigations, regulatory actions, whistleblower lawsuits and other legal proceedings;
•
our dependence on key management personnel, key executive and local facility management personnel, the failure to attract and retain such personnel, including our Chief Executive Officer, and the impact of any disruptions from the recent transition of various executives;
•
the impact of competition for staffing, labor shortages and higher turnover rates on our labor costs and profitability;
•
the impact of inflationary pressure and interest rate volatility;
•
compliance with laws and government regulations;
•
our indebtedness, our ability to meet our debt obligations, and our ability to incur substantially more debt;
•
the impact of payments received from the government and third-party payors on our revenue and results of operations;
•
the impact of volatility in the global capital and credit markets, as well as significant developments in macroeconomic and political conditions that are out of our control, including any effects that a U.S. government shutdown, tariffs or trade disputes may have on financial markets and macroeconomic conditions;
•
the impact of general economic and employment conditions on our business and future results of operations, including increased construction and other costs due to inflation, the imposition of tariffs or trade disputes;
•
the impact from changes in expectations resulting from actuarial and other reviews of our liability reserves and other aspects of our business;
•
difficulties in successfully integrating the operations of acquired facilities or realizing the potential benefits and synergies of our acquisitions and joint ventures;
•
our ability to recruit and retain quality psychiatrists and other physicians, nurses, counselors and other medical support personnel;
•
the occurrence of patient incidents, which could result in negative media coverage, adversely affect the price of our securities and result in incremental regulatory burdens and governmental investigations;
•
the impact of class action and other claims brought against us or our facilities including claims for damages for personal injuries, medical malpractice, overpayments, breach of contract, securities law violations, tort and employee related claims;
•
the outcome of pending litigation;
•
the impact of carrying a large self-insured retention, the possibilities of being responsible for significant amounts not covered by insurance, premium increases and insurance not being available on acceptable terms because of our claims experience;
•
the impact of the enactment, amendment or expiration of statutes and regulations affecting the healthcare industry, and potential reductions to Medicare and Medicaid payment rates, changes in reimbursement practices or funding levels, or modification of Medicaid supplemental payment programs;
•
the impact of the restructuring, consolidation, and elimination of federal agencies that regulate the healthcare industry, which could result in changes to federal agency reviews and enforcement activities, priorities, and guidance, and has the potential to cause delays in obtaining necessary or desired reviews and approvals for our facilities;
•
our acquisition, joint venture and wholly-owned de novo strategies, which expose us to a variety of operational and financial risks, as well as legal and regulatory risks;
•
the impact of state efforts to regulate the construction or expansion of healthcare facilities on our ability to operate and expand our operations;
•
our ability to implement our business strategies;
•
the potential impact of activist stockholder actions or tactics;
•
the impact of disruptions on our inpatient and outpatient volumes caused by pandemics, epidemics or outbreaks of infectious diseases;
•
our restrictive covenants, which may restrict our business and financing activities;
•
the impact of adverse weather conditions and climate change, including the effects of hurricanes, wildfires and other natural disasters, and any resulting outmigration;
•
the risk of a cybersecurity incident and any resulting adverse impact on our operations or violation of laws and regulations regarding information privacy;
•
the impact of our business if our information systems fail or our databases are destroyed or damaged;
•
our ability to access capital on acceptable terms;
•
our future cash flow and earnings;
•
the impact of our highly competitive industry on patient volumes;
•
our ability to cultivate and maintain relationships with referral sources;
•
the impact of the trend for insurance companies and managed care organizations to enter into sole source contracts on our ability to obtain patients;
•
the impact of value-based purchasing programs on our revenue;
•
our potential inability to extend leases at expiration;
•
the impact of controls designed to reduce inpatient services on our revenue;
•
the impact of different interpretations of accounting principles on our results of operations or financial condition;
•
the impact of environmental, health and safety laws and regulations, especially in locations where we have concentrated operations;
•
the impact of laws and regulations relating to privacy and security of patient health information and standards for electronic transactions;
•
the impact of a change in the mix of our earnings, adverse changes in our effective tax rate and adverse developments in tax laws generally;
•
changes in interpretations, assumptions and expectations regarding tax legislation and policy, including provisions that may be issued by federal and state taxing authorities;
•
failure to maintain effective internal control over financial reporting;
•
the impact of fluctuations in our operating results, quarter to quarter earnings and other factors on the price of our securities;
•
the impact of various executive orders affecting the broader healthcare industry; and
•
those risks and uncertainties described from time to time in our filings with the SEC.
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. These forward-looking statements are made only as of the date of this Annual Report on Form 10-K. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments.
Overview
Our business strategy is to become the indispensable behavioral healthcare provider for the high-acuity and complex needs patient population. We are committed to providing the communities we serve with high-quality, cost-effective behavioral healthcare services, while growing our business, increasing profitability and creating long-term value for our stockholders. This strategy includes five growth pathways: expansions of existing facilities, joint venture partnerships, de novo facilities, acquisitions and expansion across our continuum of care. At December 31, 2025, we operated 277 behavioral healthcare facilities with over 12,500 beds in 40 states and Puerto Rico. During the year ended December 31, 2025, we added 1,089 beds, consisting of 311 added to existing facilities and 778 added through the opening of one wholly-owned facility and five joint venture facilities, and we closed five facilities totaling 382 beds. The five joint venture facilities opened during the year ended December 31, 2025, were through partnerships with Henry Ford Health, Geisinger Health, Ascension Seton, Fairview Health Services, and ECU Health. During the year ended December 31, 2025, we opened 15 CTCs.
We are the leading publicly traded pure-play provider of behavioral healthcare services in the U.S. Management believes that we are positioned as a leading platform in a highly fragmented industry under the direction of an experienced management team that has significant industry expertise. Management expects to take advantage of several strategies that are more accessible as a result of our increased size and geographic scale, including continuing a national marketing strategy to attract new patients and referral sources, increasing our volume of out-of-state referrals, providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count through acquisitions, wholly-owned de novo facilities, joint ventures and bed additions in existing facilities.
Acquisitions
On February 22, 2024, we acquired substantially all of the assets of Turning Point, a 76-bed specialty provider of substance use disorder and primary mental health treatment services that supports the Salt Lake City, Utah, metropolitan market. Turning Point provides a full continuum of treatment services, including residential, partial hospitalization and intensive outpatient services.
Results of Operations
The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands):
|
Year Ended December 31, |
||||||||||||||||||||||||
|
2025 |
2024 |
2023 |
||||||||||||||||||||||
|
Amount |
% |
Amount |
% |
Amount |
% |
|||||||||||||||||||
|
Revenue |
$ |
3,312,769 |
100.0 |
% |
$ |
3,153,963 |
100.0 |
% |
$ |
2,928,738 |
100.0 |
% |
||||||||||||
|
Salaries, wages and benefits |
1,820,703 |
55.0 |
% |
1,691,024 |
53.6 |
% |
1,572,330 |
53.7 |
% |
|||||||||||||||
|
Professional fees |
195,475 |
5.9 |
% |
189,706 |
6.0 |
% |
176,013 |
6.0 |
% |
|||||||||||||||
|
Supplies |
118,047 |
3.6 |
% |
112,713 |
3.6 |
% |
105,992 |
3.6 |
% |
|||||||||||||||
|
Rents and leases |
48,022 |
1.4 |
% |
47,861 |
1.5 |
% |
46,552 |
1.6 |
% |
|||||||||||||||
|
Other operating expenses |
553,308 |
16.7 |
% |
440,788 |
14.0 |
% |
388,906 |
13.3 |
% |
|||||||||||||||
|
Income from provider relief fund |
- |
0.0 |
% |
- |
0.0 |
% |
(6,419 |
) |
(0.2 |
)% |
||||||||||||||
|
Depreciation and amortization |
189,249 |
5.7 |
% |
149,595 |
4.7 |
% |
132,349 |
4.5 |
% |
|||||||||||||||
|
Interest expense, net |
138,864 |
4.2 |
% |
116,368 |
3.7 |
% |
82,125 |
2.8 |
% |
|||||||||||||||
|
Debt extinguishment costs |
1,269 |
0.0 |
% |
- |
0.0 |
% |
- |
0.0 |
% |
|||||||||||||||
|
Legal settlements expense |
150,966 |
4.6 |
% |
- |
0.0 |
% |
394,181 |
13.5 |
% |
|||||||||||||||
|
Loss on impairment |
1,007,892 |
30.4 |
% |
17,276 |
0.5 |
% |
9,790 |
0.3 |
% |
|||||||||||||||
|
Gain on sale of property |
(8,715 |
) |
(0.3 |
)% |
- |
0.0 |
% |
(9,747 |
) |
(0.3 |
)% |
|||||||||||||
|
Transaction, legal and other costs |
163,630 |
4.9 |
% |
46,753 |
1.5 |
% |
62,026 |
2.1 |
% |
|||||||||||||||
|
Total expenses |
4,378,710 |
132.1 |
% |
2,812,084 |
89.1 |
% |
2,954,098 |
100.9 |
% |
|||||||||||||||
|
(Loss) income before income taxes |
(1,065,941 |
) |
(32.1 |
)% |
341,879 |
10.9 |
% |
(25,360 |
) |
(0.9 |
)% |
|||||||||||||
|
Provision for (benefit from) income taxes |
25,982 |
0.8 |
% |
77,395 |
2.5 |
% |
(9,699 |
) |
(0.3 |
)% |
||||||||||||||
|
Net (loss) income |
(1,091,923 |
) |
(33.0 |
)% |
264,484 |
8.4 |
% |
(15,661 |
) |
(0.6 |
)% |
|||||||||||||
|
Net income attributable to noncontrolling interests |
(10,849 |
) |
(0.3 |
)% |
(8,872 |
) |
(0.3 |
)% |
(6,006 |
) |
(0.2 |
)% |
||||||||||||
|
Net (loss) income attributable to Acadia Healthcare Company, Inc. |
$ |
(1,102,772 |
) |
(33.3 |
)% |
$ |
255,612 |
8.1 |
% |
$ |
(21,667 |
) |
(0.8 |
)% |
||||||||||
We believe that we are well positioned to help meet the growing demand for behavioral healthcare services and recorded revenue growth of 5.0% for the year ended December 31, 2025 compared to the year ended December 31, 2024. Similar with many other healthcare providers and other industries across the country, we have been navigating a tight labor market. While we experienced higher wage inflation compared to historical averages in recent years, we continue to see stability in our labor costs and our proactive focus helps us manage through this environment. We remain focused on ensuring that we have the level of staff to meet the demand in our markets across 40 states and Puerto Rico.
The following table sets forth percent changes in same facility operating data for the years ended December 31, 2025 and 2024 compared to the previous years:
|
Year Ended December 31, |
||||
|
2025 |
2024 |
|||
|
Same Facility Results (a) |
||||
|
Revenue growth |
4.9% |
7.7% |
||
|
Patient days growth |
2.1% |
3.2% |
||
|
Admissions growth |
2.3% |
1.3% |
||
|
Average length of stay change (b) |
-0.2% |
1.9% |
||
|
Revenue per patient day growth |
2.8% |
4.3% |
||
(a)
Results for the periods presented include facilities we have operated more than one year and exclude certain closed services.
(b)
Average length of stay is defined as patient days divided by admissions.
Same facility results include operating results only for facilities and services operated in both the current and prior year. These metrics exclude the operating results associated with facilities under operation for less than one year and facilities acquired during the current or prior year, as well as facilities divested or removed from service, and also exclude general and administrative costs related to our corporate functions. Such costs related to our corporate functions include, amongst others, costs for accounting and finance, information systems, human resources, legal and operational and executive leadership. General and administrative costs directly related to the facilities are included in same facility results. Such costs directly related to our facilities include, amongst others, labor at
the facility level, insurance, including property, professional, legal and general liability insurance, hospital supplies, including medication, utilities and food service, and general maintenance costs for the facility. We determine which general and administrative costs to exclude and include in same facility results by ensuring those costs directly associated with facility operations are captured at the facility level for reporting.
We believe that providing results on a same facility basis is helpful to our investors as a measure of our financial and operating performance because it neutralizes the impact of corporate-level items that do not arise out of our core operations at our facilities and because it neutralizes the impact of new facilities that are in early stages of operation and facilities that we no longer operate, each of which may distort investors' understanding of our underlying performance at our existing and continuing facilities. Further, we believe that providing same facility information is helpful to our investors as a measure of the financial and operating performance of our existing and continuing facilities on a comparable basis, and same facility results metrics provide investors with information useful in understanding underlying organic growth in such facilities. For these reasons, we believe that same facility results are particularly useful during periods of significant expansion or contraction.
Same facility results reflect adjustments that are intended to provide the specific presentation described above and that may be irregular in timing from period to period related to newly opened or acquired facilities or facilities that we no longer operate, and may omit certain results that investors may view as important. Same facility results may therefore not be indicative of the overall performance of our business and should be not be considered as an alternative for net income or any other performance measures derived in accordance with GAAP.
Year Ended December 31, 2025 compared to the Year Ended December 31, 2024
Revenue.Revenue increased $158.8 million, or 5.0%, to $3,312.8 million for the year ended December 31, 2025 from $3,154.0 million for the year ended December 31, 2024. Same facility revenue increased by $151.5 million, or 4.9%, to $3,231.4 million for the year ended December 31, 2025 compared to $3,079.9 million for the year ended December 31, 2024, resulting from same facility growth in patient days of 2.1%, an increase in same facility revenue per patient day of 2.8% and an increase in same facility admissions of 2.3%. Consistent with the same facility patient day growth in 2024, the growth in same facility patient days for the year ended December 31, 2025 compared to the year ended December 31, 2024 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Salaries, wages and benefits.Salaries, wages and benefits ("SWB") expense was $1,820.7 million for the year ended December 31, 2025 compared to $1,691.0 million for the year ended December 31, 2024, an increase of $129.7 million. SWB expense included $31.7 million and $37.1 million of equity-based compensation expense for the years ended December 31, 2025 and 2024, respectively. Excluding equity-based compensation expense, SWB expense was $1,789.0 million, or 54.0% of revenue, for the year ended December 31, 2025, compared to $1,653.9 million, or 52.4% of revenue, for the year ended December 31, 2024. The increase in SWB expense, exclusive of equity-based compensation expense, was primarily due to new facility openings. Same facility SWB expense was $1,587.3 million for the year ended December 31, 2025, or 49.1% of revenue, compared to $1,499.1 million for the year ended December 31, 2024, or 48.7% of revenue.
Professional fees.Professional fees were $195.5 million for the year ended December 31, 2025, or 5.9% of revenue, compared to $189.7 million for the year ended December 31, 2024, or 6.0% of revenue. Same facility professional fees were $163.7 million for the year ended December 31, 2025, or 5.1% of revenue, compared to $163.3 million, for the year ended December 31, 2024, or 5.3% of revenue.
Supplies.Supplies expense was $118.0 million for the year ended December 31, 2025, or 3.6% of revenue, compared to $112.7 million for the year ended December 31, 2024, or 3.6% of revenue. Same facility supplies expense was $113.4 million for the year ended December 31, 2025, or 3.5% of revenue, compared to $109.2 million for the year ended December 31, 2024, or 3.5% of revenue.
Rents and leases.Rents and leases were $48.0 million for the year ended December 31, 2025, or 1.4% of revenue, compared to $47.9 million for the year ended December 31, 2024, or 1.5% of revenue. Same facility rents and leases were $41.7 million for the year ended December 31, 2025, or 1.3% of revenue, compared to $42.4 million for the year ended December 31, 2024, or 1.4% of revenue.
Other operating expenses.Other operating expenses consisted primarily of purchased services, utilities, insurance, provider taxes, travel and repairs and maintenance expenses. Other operating expenses were $553.3 million for the year ended December 31, 2025, or 16.7% of revenue, compared to $440.8 million for the year ended December 31, 2024, or 14.0% of revenue. Same facility other operating expenses were $500.9 million for the year ended December 31, 2025, or 15.5% of revenue, compared to $410.6 million for the year ended December 31, 2024, or 13.3% of revenue. The years ended December 31, 2025 and 2024 included unfavorable adjustments of $52.7 million and $10.1 million, respectively, to our estimated liability for self-insured professional and general liability claims relating to the settlement or expected settlement of certain prior year claims.
Depreciation and amortization.Depreciation and amortization expense was $189.2 million for the year ended December 31, 2025, or 5.7% of revenue, compared to $149.6 million for the year ended December 31, 2024, or 4.7% of revenue. The increase in depreciation and amortization was primarily due to the opening of new facilities and expansion of existing facilities during the year ended December 31, 2025.
Interest expense.Interest expense was $138.9 million for the year ended December 31, 2025 compared to $116.4 million for the year ended December 31, 2024. The increase in interest expense was primarily the result of increased borrowings.
Debt extinguishment costs.Debt extinguishment costs were $1.3 million for the year ended December 31, 2025 related to the refinancing of the Prior Credit Facility.
Legal settlements expense. Legal settlements expense for the year ended December 31, 2025 was $151.0 million due to $147.5 million of expense for the 2019 Securities Litigation and $3.5 million of expense for the Desert Hills Litigation.
Loss on impairment. During the year ended December 31, 2025, we recorded non-cash impairment charges totaling $1,007.9 million. The 2025 non-cash impairment charges included goodwill impairment of $996.2 million, indefinite-lived intangible asset impairments of $0.3 million, property impairments of $10.4 million and operating lease right-of-use asset impairments of $1.0 million. During the year ended December 31, 2024, we recorded non-cash impairment charges totaling $17.3 million related to the closure of certain facilities. The 2024 non-cash impairment charges included indefinite-lived intangible asset impairments of $3.5 million, property impairments of $12.4 million and operating lease right-of-use asset impairments of $1.4 million.
Gain on sale of property. During the year ended December 31, 2025, we recorded an $8.7 million gain on facility property sale.
Transaction, legal and other costs.Transaction, legal and other costs were $163.6 million for the year ended December 31, 2025 compared to $46.8 million for the year ended December 31, 2024. Transaction, legal and other costs represent legal, accounting, government investigation, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective periods, as summarized below (in thousands):
|
Year Ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Government investigations |
$ |
135,259 |
$ |
30,620 |
||||
|
Termination and restructuring costs |
19,871 |
1,362 |
||||||
|
Legal, accounting and other acquisition-related costs |
8,500 |
11,172 |
||||||
|
Management transition costs |
- |
3,599 |
||||||
|
Total |
$ |
163,630 |
$ |
46,753 |
||||
Government investigations include legal fees and settlement costs related to certain litigation, including the matters referenced in Note 11 - Commitments and Contingencies in the accompanying notes to our consolidated financial statements. Termination and restructuring costs include costs, net of gains, incurred related to workforce reductions, contract amendments, and the closure and disposition of certain facilities, including related lease terminations. Legal, accounting and other acquisition-related costs include costs incurred for the development of new facilities ($2.1 million and $5.0 million for the years ended December 31, 2025 and 2024, respectively); legal and settlement costs incurred related to certain litigation not included in government investigations ($6.3 million and $4.8 million for the years ended December 31, 2025 and 2024, respectively); and direct costs associated with acquisitions ($0.1 million and $1.4 million for the years ended December 31, 2025 and 2024, respectively). Management transition costs include certain costs associated with the transition of the leadership team, including the design and implementation of the revised organizational structure. Management transition costs incurred with the transition of our Chief Executive Officer from Debra K. Osteen to Christopher H. Hunter beginning in the first quarter of 2022 concluded in the fourth quarter of 2024.
Provision for income taxes. For the year ended December 31, 2025, the provision for income taxes was $26.0 million, reflecting an effective tax rate of (2.4)%, compared to the provision for taxes of $77.4 million, reflecting an effective tax rate of 22.6%, for the year ended December 31, 2024. The Company's pre-tax loss for the year ended December 31, 2025 included $996.2 million of goodwill impairment expense, which is nondeductible for income tax purposes and results in a decrease to the effective tax rate given the Company's pre-tax loss position. Similarly, the Company recorded additional tax expense for the year ended December 31, 2025 in connection with a valuation allowance recorded on certain state deferred tax assets, which also resulted in a decrease to the Company's effective tax rate for the year ended December 31, 2025.
As we continue to monitor the implications of potential tax legislation in each of our jurisdictions, we may adjust our estimates and record additional amounts for tax assets and liabilities. Any adjustments to our tax assets and liabilities could materially impact our provision for income taxes and our effective tax rate in the periods in which they are made.
Year Ended December 31, 2024 compared to the Year Ended December 31, 2023
Revenue.Revenue increased $225.3 million, or 7.7%, to $3,154.0 million for the year ended December 31, 2024 from $2,928.7 million for the year ended December 31, 2023. Same facility revenue increased by $220.8 million, or 7.7%, to $3,100.0 million for the year ended December 31, 2024 compared to $2,879.2 million for the year ended December 31, 2023, resulting from same facility growth in patient days of 3.2%, an increase in same facility revenue per day of 4.3% and an increase in same facility admissions of 1.3%. Consistent with the same facility patient day growth in 2023, the growth in same facility patient days for the year ended December 31, 2024 compared to the year ended December 31, 2023 resulted from the addition of beds to our existing facilities and ongoing demand for our services.
Salaries, wages and benefits.SWB expense was $1,691.0 million for the year ended December 31, 2024 compared to $1,572.3 million for the year ended December 31, 2023, an increase of $118.7 million. SWB expense included $37.1 million and $32.3 million of equity-based compensation expense for the years ended December 31, 2024 and 2023, respectively. Excluding equity-based compensation expense, SWB expense was $1,653.9 million, or 52.4% of revenue, for the year ended December 31, 2024, compared to $1,540.0 million, or 52.6% of revenue, for the year ended December 31, 2023. Same facility SWB expense was $1,491.9 million for the year ended December 31, 2024, or 48.1% of revenue, compared to $1,393.6 million for the year ended December 31, 2023, or 48.4% of revenue.
Professional fees.Professional fees were $189.7 million for the year ended December 31, 2024, or 6.0% of revenue, compared to $176.0 million for the year ended December 31, 2023, or 6.0% of revenue. Same facility professional fees were $166.0 million for the year ended December 31, 2024, or 5.4% of revenue, compared to $156.2 million, for the year ended December 31, 2023, or 5.4% of revenue.
Supplies.Supplies expense was $112.7 million for the year ended December 31, 2024, or 3.6% of revenue, compared to $106.0 million for the year ended December 31, 2023, or 3.6% of revenue. Same facility supplies expense was $109.9 million for the year ended December 31, 2024, or 3.5% of revenue, compared to $103.1 million for the year ended December 31, 2023, or 3.6% of revenue.
Rents and leases.Rents and leases were $47.9 million for the year ended December 31, 2024, or 1.5% of revenue, compared to $46.6 million for the year ended December 31, 2023, or 1.6% of revenue. Same facility rents and leases were $42.7 million for the year ended December 31, 2024, or 1.4% of revenue, compared to $42.0 million for the year ended December 31, 2023, or 1.5% of revenue.
Other operating expenses.Other operating expenses consisted primarily of purchased services, utilities, insurance, provider taxes, travel and repairs and maintenance expenses. Other operating expenses were $440.8 million for the year ended December 31, 2024, or 14.0% of revenue, compared to $388.9 million for the year ended December 31, 2023, or 13.3% of revenue. Same facility other operating expenses were $408.3 million for the year ended December 31, 2024, or 13.2% of revenue, compared to $361.8 million for the year ended December 31, 2023, or 12.6% of revenue.
Income from provider relief fund. For the year ended December 31, 2023, we recorded $6.4 million of income from provider relief fund related to ARP funds received in 2022.
Depreciation and amortization.Depreciation and amortization expense was $149.6 million for the year ended December 31, 2024, or 4.7% of revenue, compared to $132.3 million for the year ended December 31, 2023, or 4.5% of revenue.
Interest expense.Interest expense was $116.4 million for the year ended December 31, 2024 compared to $82.1 million for the year ended December 31, 2023. The increase in interest expense was primarily the result of increased borrowings.
Legal settlements expense.Legal settlements expense for the year ended December 31, 2023 was $394.2 million associated with the Desert Hills Litigation.
Loss on impairment. During the year ended December 31, 2024, we recorded non-cash impairment charges totaling $17.3 million related to the closure of certain facilities. The 2024 non-cash impairment charges included indefinite-lived intangible asset impairments of $3.5 million, property impairments of $12.4 million and operating lease right-of-use asset impairments of $1.4 million. During the year ended December 31, 2023, we recorded non-cash impairment charges totaling $9.8 million related to the closure of certain facilities. The 2023 non-cash impairment charges included indefinite-lived intangible asset impairments of $5.4 million, property impairments of $2.0 million and operating lease right-of-use asset impairments of $2.4 million.
Gain on sale of property.During the year ended December 31, 2023, we recorded a $9.7 million gain on facility property sale.
Transaction, legal and other costs.Transaction, legal and other costs were $46.8 million for the year ended December 31, 2024 compared to $62.0 million for the year ended December 31, 2023. Transaction, legal and other costs represent legal, accounting,
government investigation, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective periods, as summarized below (in thousands):
|
Year Ended December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Government investigations |
$ |
30,620 |
$ |
18,796 |
||||
|
Legal, accounting and other acquisition-related costs |
11,172 |
12,705 |
||||||
|
Management transition costs |
3,599 |
23,283 |
||||||
|
Termination and restructuring costs |
1,362 |
7,242 |
||||||
|
Total |
$ |
46,753 |
$ |
62,026 |
||||
Government investigations include legal fees and settlement costs related to certain litigation, including the matters referenced in Note 11 - Commitments and Contingencies in the accompanying notes to our consolidated financial statements. Termination and restructuring costs include costs, net of gains, incurred related to workforce reductions, contract amendments, and the closure and disposition of certain facilities, including related lease terminations. Legal, accounting and other acquisition-related costs include costs incurred for the development of new facilities ($5.0 million and $2.9 million for the years ended December 31, 2024 and 2023, respectively); legal and settlement costs incurred related to certain litigation not included in government investigations ($4.8 million and $8.8 million for the years ended December 31, 2024 and 2023, respectively); and direct costs associated with acquisitions ($1.4 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively). Management transition costs include certain costs associated with the transition of the leadership team, including the design and implementation of the revised organizational structure. Management transition costs incurred with the transition of our Chief Executive Officer from Debra K. Osteen to Christopher H. Hunter beginning in the first quarter of 2022 concluded in the fourth quarter of 2024.
Provision for (benefit from) income taxes.For the year ended December 31, 2024, the provision for income taxes was $77.4 million, reflecting an effective tax rate of 22.6%, compared to the benefit from taxes of $(9.7) million, reflecting an effective tax rate of 38.2%, for the year ended December 31, 2023. Our higher pre-tax results for the year ended December 31, 2024 yields lower volatility in the items impacting the effective tax rate for the year ended December 31, 2024 when compared to prior periods.
Liquidity and Capital Resources
Cash provided by operating activities for the year ended December 31, 2025 was $131.9 million compared to $129.7 million for the year ended December 31, 2024. Operating cash flows for the year ended December 31, 2025 were impacted by a decrease in earnings, an increase in cash paid for transaction, legal and other costs and $147.5 million of legal settlements expense for the 2019 Securities Litigation. Operating cash flows for the year ended December 31, 2024 were impacted by Desert Hills Litigation payments of $400.0 million in January 2024. Days sales outstanding at December 31, 2025 was 49 compared to 43 at December 31, 2024 due primarily to new facilities that continue to ramp up during the start up period, as well as identifiable payor delays, with targeted actions underway to accelerate collections.
Cash used in investing activities for the year ended December 31, 2025 was $556.2 million compared to $736.5 million for the year ended December 31, 2024. Cash used in investing activities for the year ended December 31, 2025 primarily consisted of $571.8 million of cash paid for capital expenditures, and $8.2 million of cash paid for acquisitions, offset by proceeds from the sale of property and equipment of $23.8 million. Cash paid for capital expenditures for the year ended December 31, 2025 was $571.8 million, consisting of routine or maintenance capital expenditures of $104.4 million and expansion capital expenditures of $467.4 million. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue. Routine or maintenance capital expenditures, including information technology capital expenditures, were approximately 3% of revenue for the year ended December 31, 2025. Cash used in investing activities for the year ended December 31, 2024 primarily consisted of $690.4 million of cash paid for capital expenditures, $53.6 million of cash paid for acquisitions and $2.9 million of cash paid for other, offset by proceeds from the sale of property and equipment of $10.4 million. Cash paid for capital expenditures for the year ended December 31, 2024 was $690.4 million, consisting of routine or maintenance capital expenditures of $104.0 million and expansion capital expenditures of $586.4 million.
Cash provided by financing activities for the year ended December 31, 2025 was $481.3 million compared to $583.0 million for the year ended December 31, 2024. Cash provided by financing activities for the year ended December 31, 2025 primarily consisted of borrowings on long-term debt of $1,200.0 million, borrowings on revolving credit facility of $1,069.0 million and contributions from noncontrolling partners in joint ventures of $8.6 million, offset by principal payments on long-term debt of $12.2 million, principal payments on revolving credit facility of $1,035.0 million, distributions to noncontrolling partners in joint ventures of $3.9 million, repayment of long-term debt of $670.9 million, payment of debt issuance costs of $18.6 million, repurchase of common stock of $50.0 million, repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises, of $4.2 million, and cash consideration paid of $1.5 million. Cash provided by financing activities for the year ended December 31, 2024 primarily consisted of borrowings on long term debt of $350.0 million, borrowings on revolving credit facility of $305.0 million and
contributions from noncontrolling partners in joint ventures of $5.2 million, offset by principal payments on long-term debt of $56.3 million, principal payments on revolving credit facility of $15.0 million, distributions to noncontrolling partners in joint ventures of $2.9 million, payment of debt issuance costs of $1.5 million and repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises, of $1.3 million.
We had total available cash and cash equivalents of $133.2 million, $76.3 million and $100.1 million at December 31, 2025, 2024 and 2023, respectively, of which approximately $8.0 million, $7.7 million and $11.3 million, respectively, was held by our foreign subsidiaries. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S.
We actively manage our capital structure and regularly evaluate the availability of capital in the public and private markets that could strengthen our long-term financial profile. As such, we may opportunistically engage in financing transactions from time to time when we believe that conditions are favorable. Such transactions may include borrowings under credit facilities, the issuance of debt, equity or hybrid securities, the incurrence of term loans, or the refinancing or extinguishment of existing indebtedness. There can be no assurance any such financing opportunities will be available to us on terms and conditions acceptable to us or at all. Although we cannot provide any assurance, we believe that we will have sufficient capital available to fund requirements through the 12 month period following the filing of this Annual Report on Form 10-K, and based on current expectations, the long term.
Share Repurchase Program
On February 25, 2025, our board of directors authorized the Share Repurchase Program pursuant to which we may, from time to time, acquire up to $300.0 million of outstanding shares of our common stock, exclusive of any fees, commissions, or other expenses related to such repurchases. Repurchases made pursuant to the Share Repurchase Program will be made in accordance with applicable securities laws and may be made at management's discretion from time to time in the open market, in privately negotiated transactions, or through block trades, derivatives transactions, or purchases made in accordance with Rule 10b-18 and Rule 10b5-1 of the Exchange Act. The Share Repurchase Program has no termination date and may be modified, suspended or discontinued by our board of directors at any time. The authorization does not obligate us to repurchase any shares. During the year ended December 31, 2025, we repurchased 1,706,625 shares of our common stock under the Share Repurchase Program that were each cancelled at the time of repurchase for a total of $50.4 million (inclusive of $0.4 million in expenses related thereto). As of December 31, 2025, there was $250.0 million remaining under the Share Repurchase Program.
Desert Hills Litigation
As described in more detail in Note 11 -Commitments and Contingencies in the accompanying notes to our consolidated financial statements, on October 30, 2023, we entered into settlement agreements in connection with the three lawsuits related to our subsidiary Youth and Family Centered Services of New Mexico. The settlement agreements were approved by the New Mexico State District Court in December 2023 and fully resolved such cases with no admission of liability or wrongdoing by us. On January 19, 2024, pursuant to the terms of the settlement agreements, we paid an aggregate amount of $400.0 million in exchange for the release and discharge of all claims arising from, relating to, concerning or with respect to all harm, injuries or damages asserted in such cases or that may be asserted in the future by the plaintiffs in those cases.
Credit Facility
On February 28, 2025, we entered into the Credit Agreement, which provides for the $1.0 billion Revolving Facility (including a $50.0 million sublimit for the issuance of letters of credit and a $50.0 million swingline subfacility) and a $650.0 million Term Loan Facility, each maturing on February 28, 2030.
On the Credit Facility Closing Date, the full $650.0 million amount of the Term Loan Facility was funded, and $550.0 million was funded under the Revolving Facility, which amounts were used, among other things, to refinance the outstanding obligations under the Prior Credit Facility.
Borrowings under the Credit Agreement bear interest at a floating rate equal to, at our option, either (i) a SOFR-based rate plus a margin ranging from 1.375% to 2.250% or (ii) a base rate plus a margin ranging from 0.375% to 1.250%, in each case, depending on our Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement). In addition, an unused fee that varies according to our Consolidated Total Net Leverage Ratio ranging from 0.200% to 0.350% is payable quarterly in arrears based on the average daily undrawn portion of the commitments in respect of the Revolving Facility. The Term Loan Facility requires quarterly principal repayments of $4.1 million through March 31, 2026, $8.1 million from June 30, 2026 to March 31, 2028, $12.2 million from June 30, 2028 to March 31, 2029 and $16.3 million from June 30, 2029 to December 31, 2029, with the remaining outstanding principal balance of the Term Loan Facility due on the maturity date of February 28, 2030.
We have the ability to increase the amount of the Credit Facility, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more Incremental Facilities, upon obtaining additional commitments from new or existing lenders and the satisfaction of certain customary conditions precedent for such Incremental Facilities. Such Incremental
Facilities may not exceed the sum of (i) the greater of $710.0 million and an amount equal to 100% of our LTM Consolidated EBITDA (as defined in the Credit Agreement) at the time of determination and (ii) additional amounts that would not cause our Consolidated Senior Secured Net Leverage Ratio (as defined in the Credit Agreement) to exceed 4.0 to 1.0.
Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct and indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of our obligations under the Credit Agreement. The obligations of us and such guarantor subsidiaries are secured by a pledge of substantially all of our and such guarantor subsidiaries' assets (excluding all real property and certain other customarily excluded assets).
The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including limitations on the ability of us and our subsidiaries to: (i) incur debt; (ii) permit additional liens; (iii) make investments and acquisitions; (iv) merge or consolidate with others; (v) dispose of assets; (vi) pay dividends and distributions; (vii) pay junior indebtedness; and (viii) enter into affiliate transactions, in each case, subject to customary exceptions. In addition, the Credit Agreement contains financial covenants requiring us to maintain, on a consolidated basis as of the last day of each quarterly period, a Consolidated Total Net Leverage Ratio of not more than 5.0 to 1.0 (which may be increased in connection with a material acquisition to 5.5 to 1.0 for a four quarter period up to three times during the term of the Credit Agreement) and a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of at least 3.0 to 1.0. The Credit Agreement also includes events of default customary for facilities of this type and upon the occurrence of such events of default, among other things, all outstanding loans under the Credit Agreement may be accelerated, lenders commitments terminated, and/or lenders may exercise collateral remedies. At December 31, 2025, our Consolidated Total Net Leverage Ratio was 4.0x, and we were in compliance with all financial covenants. Consolidated Total Net Leverage Ratio is being reported as calculated under the Credit Agreement and not pursuant to GAAP. Investors should refer to the agreements governing the Credit Agreement attached as exhibits to our periodic reports for further information related to the calculation thereof and should not consider Consolidated Total Net Leverage Ratio as an alternative for any measures derived in accordance with GAAP. For risks related to our indebtedness and compliance with these covenants, see "Item 1A. Risk Factors".
For the year ended December 31, 2025, we borrowed $954.0 million on the Revolving Facility and repaid $550.0 million of the balance outstanding.
At December 31, 2025, we had $594.8 million of availability under the Revolving Facility and had standby letters of credit outstanding of $1.2 million related to security for multiple development projects.
Prior Credit Facility
On March 17, 2021, we entered into the Prior Credit Facility, which provided for a $600.0 million Prior Revolving Facility and Prior Term Loan Facility, each of which was scheduled to mature on March 17, 2026. The Prior Revolving Facility further provided for a $20.0 million subfacility for the issuance of letters of credit.
For the year ended December 31, 2025, we borrowed $115.0 million on the Prior Revolving Facility and repaid $485.0 million of the balance outstanding prior to February 28, 2025, when the Prior Credit Facility was refinanced with the Credit Facility. For the year ended December 31, 2024, we borrowed $305.0 million on the Prior Revolving Facility and repaid $15.0 million of the balance outstanding.
On February 28, 2025, we refinanced the Prior Credit Facility by using the proceeds of the Credit Facility to repay the outstanding balances of the Prior Term Loan Facility and the Prior Revolving Facility, which totaled $670.9 million and $485.0 million, respectively. In connection therewith, we recorded a loss on extinguishment of $1.3 million, which is included in debt extinguishment costs in the consolidated statements of operations.
Senior Notes
5.500% Senior Notes due 2028
On June 24, 2020, we issued $450.0 million of 5.500% Senior Notes due 2028 (the "5.500% Senior Notes"). The 5.500% Senior Notes mature on July 1, 2028 and bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on January 1 and July 1 of each year, commencing on January 1, 2021.
5.000% Senior Notes due 2029
On October 14, 2020, we issued $475.0 million of 5.000% Senior Notes due 2029 (the "5.000% Senior Notes"). The 5.000% Senior Notes mature on April 15, 2029 and bear interest at a rate of 5.000% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021.
7.375% Senior Notes due 2033
On March 10, 2025, we issued $550.0 million of 7.375% Senior Notes due 2033 (the "7.375% Senior Notes"). The 7.375% Senior Notes mature on March 15, 2033 and bear interest at a rate of 7.375% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025. The net proceeds from the issuance and sale of the 7.375% Senior Notes, together with cash on hand, were used to pay down $550.0 million of outstanding borrowings under the Revolving Facility.
The indentures governing the 5.500% Senior Notes, the 5.000% Senior Notes and the 7.375% Senior Notes (together, the "Senior Notes") contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: (i) pay dividends, redeem stock or make other distributions or investments; (ii) incur additional debt or issue certain preferred stock; (iii) transfer or sell assets; (iv) engage in certain transactions with affiliates; (v) create restrictions on dividends or other payments by the restricted subsidiaries; (vi) merge, consolidate or sell substantially all of our assets; and (vii) create liens on assets.
The Senior Notes issued by us are guaranteed by each of our subsidiaries that guarantee our obligations under the Credit Facility. The guarantees are full and unconditional and joint and several.
We may redeem the Senior Notes at our option, in whole or part, at the dates and amounts set forth in the indentures.
Supplemental Guarantor Financial Information
We conduct all of our business through our subsidiaries. The Senior Notes are jointly and severally guaranteed on an unsecured senior basis by all of our subsidiaries that guarantee our obligations under the Credit Facility. The summarized financial information presented below is consistent with our consolidated financial statements, except transactions between combining entities have been eliminated. Financial information for our combined non-guarantor entities has been excluded pursuant to SEC Regulation S-X Rule 13-01. Presented below is financial information for the combined wholly-owned subsidiary guarantors at December 31, 2025 and 2024, and for the year ended December 31, 2025.
Summarized balance sheet information (in thousands):
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Current assets |
$ |
598,869 |
$ |
436,571 |
||||
|
Property and equipment, net |
2,026,345 |
1,819,037 |
||||||
|
Goodwill |
1,163,168 |
2,144,452 |
||||||
|
Total noncurrent assets |
3,519,494 |
4,246,078 |
||||||
|
Current liabilities |
474,194 |
548,909 |
||||||
|
Long-term debt |
2,471,529 |
1,880,093 |
||||||
|
Total noncurrent liabilities |
2,770,469 |
2,111,252 |
||||||
|
Redeemable noncontrolling interests |
- |
- |
||||||
|
Total equity |
873,699 |
2,022,488 |
||||||
Summarized operating results information (in thousands):
|
Year Ended December 31, 2025 |
||||
|
Revenue |
$ |
2,832,572 |
||
|
Loss before income taxes |
(1,145,221 |
) |
||
|
Net loss |
(1,158,524 |
) |
||
|
Net loss attributable to Acadia Healthcare Company, Inc. |
(1,158,524 |
) |
||
Contractual Obligations
The following table presents a summary of contractual obligations (dollars in thousands):
|
Payments Due by Period |
||||||||||||||||||||
|
Less Than |
1-3 Years |
3-5 Years |
More Than |
Total |
||||||||||||||||
|
Long-term debt (a) |
$ |
174,751 |
$ |
801,776 |
$ |
1,556,788 |
$ |
641,266 |
$ |
3,174,581 |
||||||||||
|
Operating lease liabilities (b) |
28,158 |
49,518 |
36,658 |
81,936 |
196,270 |
|||||||||||||||
|
Finance lease liabilities |
1,089 |
2,178 |
2,305 |
18,428 |
24,000 |
|||||||||||||||
|
Total obligations and commitments |
$ |
203,998 |
$ |
853,472 |
$ |
1,595,751 |
$ |
741,630 |
$ |
3,394,851 |
||||||||||
(a)
Amounts include required principal and interest payments. The projected interest payments reflect interest rates in place on our variable-rate debt at December 31, 2025.
(b)
Amounts exclude variable components of lease payments.
Off-Balance Sheet Arrangements
At December 31, 2025, we had standby letters of credit outstanding of $1.2 million related to security for multiple development projects.
Market Risk
Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at December 31, 2025 was composed of $1,462.2 million of fixed-rate debt and $1,037.8 million of variable-rate debt with interest based on Adjusted Term SOFR plus an applicable margin. Based on our borrowing level at December 31, 2025, a hypothetical 1% increase in interest rates would decrease our pretax income on an annual basis by approximately $10.4 million.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses included in the financial statements. Estimates are based on historical experience and other available information, the results of which form the basis of such estimates. While management believes our estimation processes are reasonable, actual results could differ from our estimates. The following accounting policies are considered critical to the portrayal of our financial condition and operating performance and involve highly subjective and complex assumptions and assessments:
Revenue and Accounts Receivable
Our revenue is primarily derived from services rendered to patients for inpatient psychiatric and substance abuse care, outpatient psychiatric care and adolescent residential treatment. We receive payments from the following sources for services rendered in our facilities: (i) state governments under their respective Medicaid and other programs; (ii) commercial insurers; (iii) the federal government under the Medicare program administered by CMS and other programs; and (iv) individual patients and clients. We determine the transaction price based on established billing rates reduced by contractual adjustments provided to third-party payors, discounts provided to uninsured patients and implicit price concessions. Contractual adjustments and discounts are based on contractual agreements, discount policies and historical experience. Implicit price concessions are based on historical collection experience.
We derive a significant portion of our revenue from Medicare, Medicaid and other payors that receive discounts from established billing rates. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be calculated are complex, subject to interpretation and adjustment, and may include multiple reimbursement mechanisms for different types of services provided in our inpatient facilities and cost settlement provisions. Management estimates the transaction price on a payor-specific basis given its interpretation of the applicable regulations or contract terms. The services authorized and provided and related reimbursement are often subject to interpretation that could result in payments that differ from our estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management.
Settlements under cost reimbursement agreements with third-party payors are estimated and recorded in the period in which the related services are rendered and are adjusted in future periods as final settlements are determined. Final determination of amounts earned under the Medicare and Medicaid programs often occurs in subsequent years because of audits by such programs, rights of appeal and the application of numerous technical provisions. In the opinion of management, adequate provision has been made for any adjustments and final settlements. However, there can be no assurance that any such adjustments and final settlements will not have a
material effect on our financial condition or results of operations. We had cost report receivables of $8.4 million as of December 31, 2025 which are included in other current assets on the consolidated balance sheet. Our cost report payables were $0.8 million as of December 31, 2024, and are included in other current liabilities on the consolidated balance sheet. The net adjustments to estimated cost report settlements resulted in a decrease to revenue of $0.7 million for the year ended December 31,2025 and an increase to revenue of $0.2 million and $1.8 million, respectively, for the years ended December 31, 2024 and 2023.
The following table presents revenue by payor type and as a percentage of revenue for the years ended December 31, 2025, 2024 and 2023 (in thousands):
|
Year Ended December 31, |
||||||||||||||||||||||||
|
2025 |
2024 |
2023 |
||||||||||||||||||||||
|
Amount |
% |
Amount |
% |
Amount |
% |
|||||||||||||||||||
|
Commercial |
$ |
813,788 |
24.6 |
% |
$ |
820,828 |
26.0 |
% |
$ |
820,701 |
28.0 |
% |
||||||||||||
|
Medicare |
473,455 |
14.3 |
% |
447,078 |
14.2 |
% |
441,761 |
15.1 |
% |
|||||||||||||||
|
Medicaid |
1,912,168 |
57.7 |
% |
1,781,615 |
56.5 |
% |
1,578,518 |
53.9 |
% |
|||||||||||||||
|
Self-Pay |
64,822 |
2.0 |
% |
60,101 |
1.9 |
% |
67,583 |
2.3 |
% |
|||||||||||||||
|
Other |
48,536 |
1.4 |
% |
44,341 |
1.4 |
% |
20,175 |
0.7 |
% |
|||||||||||||||
|
Revenue |
$ |
3,312,769 |
100.0 |
% |
$ |
3,153,963 |
100.0 |
% |
$ |
2,928,738 |
100.0 |
% |
||||||||||||
The following tables present a summary of our aging of accounts receivable at December 31, 2025 and 2024:
December 31, 2025
|
Current |
30-90 |
90-150 |
>150 |
Total |
||||||||||||||||
|
Commercial |
14.7 |
% |
4.8 |
% |
3.1 |
% |
8.2 |
% |
30.8 |
% |
||||||||||
|
Medicare |
8.6 |
% |
1.9 |
% |
1.0 |
% |
1.5 |
% |
13.0 |
% |
||||||||||
|
Medicaid |
31.1 |
% |
6.9 |
% |
4.3 |
% |
6.9 |
% |
49.2 |
% |
||||||||||
|
Self-Pay |
1.3 |
% |
1.5 |
% |
1.5 |
% |
2.7 |
% |
7.0 |
% |
||||||||||
|
Total |
55.7 |
% |
15.1 |
% |
9.9 |
% |
19.3 |
% |
100.0 |
% |
||||||||||
December 31, 2024
|
Current |
30-90 |
90-150 |
>150 |
Total |
||||||||||||||||
|
Commercial |
17.0 |
% |
4.7 |
% |
2.5 |
% |
8.2 |
% |
32.4 |
% |
||||||||||
|
Medicare |
9.0 |
% |
1.6 |
% |
0.6 |
% |
1.2 |
% |
12.4 |
% |
||||||||||
|
Medicaid |
33.9 |
% |
5.6 |
% |
2.9 |
% |
5.2 |
% |
47.6 |
% |
||||||||||
|
Self-Pay |
1.5 |
% |
1.7 |
% |
1.5 |
% |
2.9 |
% |
7.6 |
% |
||||||||||
|
Total |
61.4 |
% |
13.6 |
% |
7.5 |
% |
17.5 |
% |
100.0 |
% |
||||||||||
Insurance
We are subject to medical malpractice and other lawsuits due to the nature of the services we provide. A portion of our professional liability risks are insured through a wholly-owned insurance subsidiary providing coverage for up to $10.0 million per claim, $15.0 million for certain other claims and $25.0 million for certain batched claims through August 31, 2025 and $15.0 million per claim and $25.0 million for certain batched claims thereafter. We have obtained reinsurance coverage from a third-party to cover claims in excess of those limits. The reinsurance policy has a coverage limit of $80.0 million or $75.0 million in the aggregate for certain other claims through August 31, 2025 and $75.0 million in the aggregate for claims thereafter, with exclusions for certain types of incidents. Our reinsurance receivables are recognized consistent with the related liabilities and include known claims and any incurred but not reported claims that are covered by current insurance policies in place. The reserve for professional and general liability risks was estimated based on historical claims, prior settlements and judgments, industry trends, severity factors, and other actuarial assumptions. The estimated accrual for professional and general liabilities could be significantly affected should current and future occurrences differ from historical claim trends and expectations. While claims are monitored closely when estimating professional and general liability accruals, the complexity of the claims and wide range of potential outcomes often hampers timely adjustments to the assumptions used in these estimates. We recorded unfavorable adjustments of $52.7 million and $10.1 million to our estimated liability for self-insured professional and general liability claims during the years ended December 31, 2025 and 2024, respectively, relating to the settlement or expected settlement of certain prior year claims. In particular, the unfavorable adjustment recorded during the year ended December 31, 2025, was driven by higher expected settlement costs for claims related to policy years prior to September 1, 2024; a significant increase in claim frequency during the policy year ended August 31, 2025, compared to the prior policy year; and less favorable insurance coverage terms compared to prior years. The professional and general liability reserve was $181.8 million at December 31, 2025, of which $31.4 million was included in other accrued liabilities and $150.4 million was included in other long-term liabilities. The professional and general liability reserve was $87.5 million at December 31, 2024, of
which $12.5 million was included in other accrued liabilities and $75.0 million was included in other long-term liabilities. We estimate receivables for the portion of professional and general liability reserves that are recoverable under our insurance policies. Such receivable was $28.8 million at December 31, 2025, of which $7.2 million was included in other current assets and $21.6 million was included in other assets, and such receivable was $9.3 million at December 31, 2024, of which $0.5 million was included in other current assets and $8.8 million was included in other assets.
Our statutory workers' compensation program is fully insured with a $0.5 million deductible per accident. The workers' compensation liability was $34.3 million at December 31, 2025, of which $18.5 million was included in accrued salaries and benefits and $15.8 million was included in other long-term liabilities, and such liability was $30.7 million at December 31, 2024, of which $12.0 million was included in accrued salaries and benefits and $18.7 million was included in other long-term liabilities. The reserve for workers compensation claims was based upon independent actuarial estimates of future amounts that will be paid to claimants. Management believes that adequate provisions have been made for workers' compensation and professional and general liability risk exposures.
Property and Equipment and Other Long-Lived Assets
Property and equipment are recorded at cost. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets, which typically range from 10 to 50 years for buildings and improvements, three to seven years for equipment and the shorter of the lease term or estimated useful lives for leasehold improvements. When assets are sold or retired, the corresponding cost and accumulated depreciation are removed from the related accounts and any gain or loss is recorded in the period of sale or retirement. Repair and maintenance costs are expensed as incurred. Depreciation expense was $189.2 million, $149.6 million and $132.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The carrying values of long-lived assets are reviewed for possible impairment whenever events, circumstances or operating results indicate that the carrying amount of an asset may not be recoverable. If this review indicates that the asset will not be recoverable, as determined based upon the undiscounted cash flows of the operating asset over the remaining useful life, the carrying value of the asset will be reduced to its estimated fair value. Fair value estimates are based on independent appraisals, market values of comparable assets or internal evaluations of future net cash flows. During the year ended December 31, 2025, we recorded non-cash property impairment charges of $10.4 million and non-cash operating lease right-of-use asset impairment charges of $1.0 million related to the closure of certain facilities, which is included in loss on impairment in the consolidated statements of operations. During the year ended December 31, 2024, we recorded non-cash property impairment charges of $12.4 million and non-cash operating lease right-of-use asset impairment charges of $1.4 million related to the closure of certain facilities, which is included in loss on impairment in the consolidated statements of operations.
We performed an impairment review of long-lived assets in the fourth quarter of 2025, 2024 and 2023 and recorded no impairment.
Goodwill and Indefinite-Lived Intangible Assets
Our goodwill and other indefinite-lived intangible assets, which consist of licenses and accreditations, trade names and certificates of need intangible assets that are not amortized, are evaluated for impairment annually during the fourth quarter or more frequently if events indicate the carrying value of a reporting unit may not be recoverable.
As of our annual impairment test on October 1, 2025, we had one reporting unit, behavioral healthcare services. In performing the goodwill impairment test, we used a combination of the income and market approaches to estimate the fair value of our reporting unit. Determining fair value requires substantial judgment and use of significant unobservable inputs, which are categorized as Level 3 fair value measurements. For the income approach, we used a discounted cash flow model in which cash flows are projected using internal forecasts over future periods, plus a terminal value, and are discounted to present value using a risk-adjusted rate of return. Our internal forecasts include estimates of growth rates and profitability based on our current views of the long-term outlook of the reporting unit and may materially differ from actual results. Discount rate assumptions are based on an assessment of the risk inherent in the projected future cash flows. For the market approach, we compared our reporting unit to guideline companies actively traded in public markets and included a control premium, which was based on acquisition premiums of selected companies similar to our reporting unit. These estimates and assumptions were determined in connection with support from a third-party valuation specialist. As of our annual impairment test on October 1, 2025, the fair value of our behavioral healthcare services reporting unit exceeded its carrying value, and therefore no impairment was recorded.
During the fourth quarter of 2025, we revised our 2025 earnings forecast to reflect the impact of higher professional and general liability ("PLGL") expenses associated primarily with patient-related litigation; lowered our internal revenue projections for future years to reflect changes in Medicaid reimbursement, primarily related to New York State exclusion of Medicaid referrals to our facilities in Pennsylvania; and experienced a sustained decline in our stock price and overall market capitalization. We concluded the combination of these factors constituted a triggering event which warranted a quantitative impairment test of our goodwill at December 31, 2025. We estimated the implied fair value of our goodwill using a combination of the income and market approaches,
as described above. The discounted cash flow model used in the income approach reflected our expectation of higher PLGL expenses and lower revenues and used a higher discount rate to correspond to the risks inherent in the reporting unit. The results of this analysis determined the fair value of our behavioral healthcare services reporting unit was less than its carrying value. Accordingly, we recorded a non-cash goodwill impairment charge of $996.2 million, representing the amount by which the Company's book value exceeds its fair value, which is included in loss on impairment in the consolidated statement of operations.
No goodwill impairment charges were recorded during the years ended December 31, 2024 or 2023.
During the years ended December 31, 2025 and 2024, we recorded non-cash indefinite-lived intangible asset impairment charges of $0.3 million and $3.5 million related to the closure of certain facilities, which is included in loss on impairment in the consolidated statements of operations.
Assessment of the potential impairment of goodwill and intangible assets is an integral part of our normal ongoing review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. In particular, estimating the fair value of our reporting unit includes substantial judgment and significant estimates and may materially differ from actual results. Changes in assumptions, industry or peer groups could negatively impact estimated fair value and impact the existence and magnitude of impairments, as well as the period in which such impairments are recognized. Impairment charges have no effect on liquidity or capital resources; however, they are a non-cash charge and could adversely affect our financial results in the period recognized.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.
The Company reviews its deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, applicable tax strategies, and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
The Company has accruals for taxes and associated interest that may become payable in future years as a result of audits by tax authorities. The Company accrues for tax contingencies when it is more likely than not that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. Although management believes that the positions taken on previously filed tax returns are reasonable, the Company nevertheless has established tax and interest reserves in recognition that various taxing authorities may challenge the positions taken by the Company resulting in additional liabilities for taxes and interest. These amounts are reviewed as circumstances warrant and adjusted as events occur that affect the Company's potential liability for additional taxes, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues, release of administrative guidance, or rendering of a court decision affecting a particular tax issue.
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