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What changed in Acadia Healthcare Company, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Acadia Healthcare Company, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+368 added−391 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Acadia Healthcare Company, Inc.'s 2023 10-K

368 paragraphs added · 391 removed · 314 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

103 edited+14 added−34 removed79 unchanged
Biggest changeA provider is not required to have actual knowledge or specific intent to commit a violation of the Anti-Kickback Statute to be found guilty of violating the law. 7 Table of Contents The Office of Inspector General of the Department of Health and Human Services (the “OIG”) has issued safe harbor regulations that protect certain types of common arrangements from prosecution or sanction under the Anti-Kickback Statute.
Biggest changeThe Office of Inspector General of the HHS (the “OIG”) has issued safe harbor regulations that protect certain types of common arrangements from prosecution or sanction under the Anti-Kickback Statute. The fact that conduct or a business arrangement does not fall within a safe harbor does not automatically render the conduct or business arrangement illegal under the Anti-Kickback Statute.
On January 19, 2021, we completed the sale of our operations in the United Kingdom (the “U.K.”) to RemedcoUK Limited, a company organized under the laws of England and Wales and owned by funds managed or advised by Waterland Private Equity Fund VII (the “U.K. Sale”). The U.K.
Sale On January 19, 2021, we completed the sale of our operations in the United Kingdom (the “U.K.”) to RemedcoUK Limited, a company organized under the laws of England and Wales and owned by funds managed or advised by Waterland Private Equity Fund VII (the “U.K. Sale”). The U.K.
On March 1, 2021, we satisfied and discharged the indentures governing the 6.500% Senior Notes due 2024 (“6.500% Senior Notes”).
On March 1, 2021, we satisfied and discharged the indentures governing the 6.500% Senior Notes due 2024 (the “6.500% Senior Notes”).
The extensive national experience and operational expertise of our management team give us what management believes to be the premier leadership team in the behavioral healthcare industry. Our management team strives to use its years of experience operating behavioral healthcare facilities to generate strong cash flow and grow a profitable business. Favorable industry and legislative trends.
The extensive national experience and operational expertise of our management team give us what management believes to be the premier leadership team in the behavioral healthcare industry. Our management team strives to use its years of experience operating behavioral healthcare facilities to generate strong cash flow and grow a profitable business. Legislative and favorable industry trends.
CARF accredits behavioral health organizations providing mental health and alcohol and drug use and addiction services, as well as opiate treatment programs, and many other types of healthcare programs. These accreditation programs are intended generally to improve the quality, safety, outcomes and value of healthcare services provided by accredited facilities.
CARF accredits behavioral healthcare organizations providing mental health and alcohol and drug use and addiction services, as well as opiate treatment programs, and many other types of healthcare programs. These accreditation programs are intended generally to improve the quality, safety, outcomes and value of healthcare services provided by accredited facilities.
A violation of the Stark Law may result in a denial of payment; required refunds to the Medicare program; imposition of statutory civil monetary penalties of up to $15,000 for each prohibited claim and up to $100,000 for circumvention schemes; exclusion from government healthcare programs; and liability under the False Claims Act.
A violation of the Stark Law may result in a denial of payment, required refunds to the Medicare program, the imposition of statutory civil monetary penalties of up to $15,000 for each prohibited claim and up to $100,000 for circumvention schemes, exclusion from government healthcare programs and liability under the False Claims Act.
One section of the SUPPORT Act, the Eliminating Kickbacks in Recovery Act (the “EKRA”), makes it a federal crime to knowingly and willfully: (1) solicit or receive any remuneration in return for referring a patient to a recovery home, clinical treatment facility or laboratory; or (2) pay or offer any remuneration to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory.
One section of the SUPPORT Act, the Eliminating Kickbacks in Recovery Act (“EKRA”), makes it a federal crime to knowingly and willfully: (1) solicit or receive any remuneration in return for referring a patient to a recovery home, clinical treatment facility or laboratory; or (2) pay or offer any remuneration to induce such a referral or in exchange for an individual using the services of a recovery home, clinical treatment facility, or laboratory.
The EKRA also contains exceptions similar to the Anti-Kickback Statute safe harbors, but those exceptions are more narrow than the Anti-Kickback Statute safe harbors such that practices that would be permissible under the Anti-Kickback Statute may violate the EKRA.
EKRA also contains exceptions similar to the Anti-Kickback Statute safe harbors, but those exceptions are more narrow than the Anti-Kickback Statute safe harbors such that practices that would be permissible under the Anti-Kickback Statute may violate EKRA.
If we are deemed to have failed to comply with the Anti-Kickback Statute, the Stark Law, the EKRA or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties and exclusion of one or more facilities from participation in the government healthcare programs.
If we are deemed to have failed to comply with the Anti-Kickback Statute, the Stark Law, EKRA or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties and exclusion of one or more facilities from participation in the government healthcare programs.
We also have a comprehensive post-acquisition strategic plan to facilitate the integration of acquired facilities that includes improving facility operations, retaining and recruiting psychiatrists and other healthcare professionals and expanding the breadth of services offered by the facilities. Accelerate expansion across the care continuum, particularly for patients with opioid use and other substance use disorders.
We also have a comprehensive post-acquisition strategic plan to facilitate the integration of acquired facilities that includes improving facility operations, retaining and recruiting psychiatrists and other healthcare professionals and expanding the breadth of services offered by the facilities. 3 Accelerate expansion across the care continuum, particularly for patients with opioid use and other substance use disorders.
As a part of the closing of the New Credit Facility on March 17, 2021, we (i) refinanced and terminated our prior credit facilities under an amended and restated credit agreement, dated as of December 31, 2012 (the “Prior Credit Facility”) and (ii) financed the redemption of all of our outstanding 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”).
As a part of the closing of the Credit Facility on March 17, 2021, we (i) refinanced and terminated our prior credit facilities under an amended and restated credit agreement, dated as of December 31, 2012 (the “Prior Credit Facility”) and (ii) financed the redemption of all of our outstanding 5.625% Senior Notes due 2023 (the “5.625% Senior Notes”).
We have not been notified of and management is otherwise currently not aware of any contamination at our currently or formerly operated facilities that could result in material liability or cost to us under environmental laws or regulations for the investigation and remediation of such contamination, and we currently are not undertaking any remediation or investigation activities in connection with any such contamination conditions.
We have not been notified of and management is otherwise currently not aware of any contamination at our currently or formerly operated facilities that could result in material liability or cost to us under environmental laws or regulations for the investigation and remediation of such contamination, and we currently are not undertaking any remediation or investigation activities 10 in connection with any such contamination conditions.
A key aspect of reform legislation is the extension of mental health parity protections established into law by the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “MHPAEA”). The MHPAEA requires employers who provide behavioral health and addiction benefits to provide such coverage to the same extent as other medical conditions.
A key aspect of reform legislation is the extension of mental health parity protections established into law by the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “MHPAEA”). The MHPAEA requires employers who provide behavioral healthcare and addiction benefits to provide such coverage to the same extent as other medical conditions.
Lengths of stay for crisis stabilization and acute care range from three to five days and from five to twelve days, respectively. Specialty Treatment Facilities Our specialty treatment facilities include residential recovery facilities and eating disorder facilities. We provide a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders.
Typical lengths of stay for crisis stabilization and acute care range from three to five days and from five to twelve days, respectively. Specialty Treatment Facilities Our specialty treatment facilities include residential recovery facilities and eating disorder facilities. We provide a comprehensive continuum of care for adults with addictive disorders and co-occurring mental disorders.
During the year ended December 31, 2022, we received $7.7 million of additional funds from the PHSSE Fund and $14.2 million from the American Rescue Plan (“ARP”) Rural Payments for Hospitals. During the year ended December 31, 2022, we recorded $21.5 million of income from provider relief fund related to PHSSE Fund and ARP funds received.
During the year ended December 31, 2022, we received $7.7 million of additional funds from the PHSSE Fund and $14.2 million from the American Rescue Plan (“ARP”) Rural Payments for Hospitals. During the year ended December 31, 2022, we recorded $21.5 million of income from provider relief fund related to PHSSE Fund amounts and ARP funds received.
For more information regarding risks of rising labor costs and its possible adverse impact on us, see “Item 1A. Risk Factors — Human Capital Risks — Our facilities face competition for staffing, labor shortages and higher turnover rates that may increase our labor costs and reduce our profitability”.
For more information regarding risks of rising labor costs and its possible adverse impact on us, see 11 “Item 1A. Risk Factors — Human Capital Risks — Our facilities face competition for staffing, labor shortages and higher turnover rates that may increase our labor costs and reduce our profitability”.
Patients with the most severe dependencies are typically placed into inpatient treatment, in which the patient resides at a treatment facility. If a patient’s condition is less severe, he or she will be offered day treatment, which allows the patient to return home in the evening.
Patients with the most severe dependencies are typically placed into 4 inpatient treatment, in which the patient resides at a treatment facility. If a patient’s condition is less severe, he or she will be offered day treatment, which allows the patient to return home in the evening.
The MHPAEA has some limitations because health plans that do not already cover mental health treatments are not required to do so, and health plans are not required to provide coverage for every mental health condition published in the Diagnostic and Statistical Manual of Mental Disorders by the American Psychiatric Association.
The MHPAEA has some 8 limitations because health plans that do not already cover mental health treatments are not required to do so, and health plans are not required to provide coverage for every mental health condition published in the Diagnostic and Statistical Manual of Mental Disorders by the American Psychiatric Association.
Those provisions include, among others: • an appropriation to the Public Health and Social Services Emergency Fund (“PHSSE Fund”), also known as the Provider Relief Fund, to reimburse, through grants or other mechanisms, eligible healthcare providers and other approved entities for COVID-19-related expenses or lost revenue; • the expansion of CMS’ Accelerated and Advance Payment Program; • the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022 and was eliminated effective July 1, 2022; and • waivers or temporary suspension of certain regulatory requirements.
Those provisions included, among others: • an appropriation to the Public Health and Social Services Emergency Fund (“PHSSE Fund”), also known as the Provider Relief Fund, to reimburse, through grants or other mechanisms, eligible healthcare providers and other approved entities for COVID-19-related expenses or lost revenue; • the expansion of CMS’ Accelerated and Advance Payment Program; • the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022, and was eliminated effective July 1, 2022; and • waivers or temporary suspension of certain regulatory requirements.
During the fourth quarter of 2020, we recorded approximately $32.8 million of income from provider relief fund related to PHSSE Fund funds received in 2020. In 2021, we received $24.2 million of additional funds from the PHSSE Fund. During the fourth quarter of 2021, we recorded $17.9 million of income from provider relief fund related to PHSSE Fund funds received.
During the fourth quarter of 2020, we recorded approximately $32.8 million of income from provider relief fund related to PHSSE Fund amounts received in 2020. In 2021, we received $24.2 million of additional funds from the PHSSE Fund. During the fourth quarter of 2021, we recorded $17.9 million of income from provider relief fund related to PHSSE Fund amounts received.
The Joint Commission and CARF are private organizations that have accreditation programs for a broad spectrum of healthcare facilities. The Joint Commission accredits a broad variety of healthcare organizations, including hospitals and behavioral health organizations.
The Joint Commission and CARF are private organizations that have accreditation programs for a broad spectrum of healthcare facilities. The Joint Commission accredits a broad variety of healthcare organizations, including hospitals and behavioral healthcare organizations.
Treatment typically is provided by an interdisciplinary team coordinating psychopharmacological, individual, group and family therapy, along with specialized accredited educational programs in both secure and unlocked environments. Lengths of stay range from three months to several years. Certain of our residential treatment centers provide group home, therapeutic group home and therapeutic foster care programs.
Treatment typically is provided by an interdisciplinary team coordinating psychopharmacological, individual, group and family therapy, along with specialized accredited educational programs in both secure and unlocked environments. Lengths of stay range from three months to several years. Certain of our residential treatment centers provide group home and therapeutic group home programs.
We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports free of charge on our website on the Investors webpage under the caption “SEC Filings” as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports free of charge on our website on the “Investors” webpage under the caption “SEC Filings” as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
On October 21, 2018, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act ( the “SUPPORT Act ”) was signed into law. The SUPPORT Act expands Medicare coverage to include Opioid Treatment Programs for services provided on or after January 2, 2020.
On October 21, 2018, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the “SUPPORT Act”) was signed into law. The SUPPORT Act expands Medicare coverage to include Opioid Treatment Programs for services provided on or after January 2, 2020.
Our inpatient facilities house and care for patients over an extended period and typically treat patients from a broadly defined regional market. We provide three basic levels of residential treatment depending on the severity of the patient’s addiction and/or behavioral disorder.
Our residential recovery facilities house and care for patients over an extended period and typically treat patients from a broadly defined regional market. We provide three basic levels of residential treatment depending on the severity of the patient’s addiction and/or behavioral disorder.
Our outpatient clinics serve patients that do not require inpatient treatment or are transitioning from a residential treatment program; have employment, family or school commitments; and have stabilized in their substance addiction recovery practices and are seeking ongoing continuing care. Eating Disorder Facilities.
Our outpatient clinics serve patients that do not require inpatient treatment or are transitioning from a residential treatment program; have employment, family or school commitments; and have stabilized in their recovery practices and are seeking ongoing continuing care. Eating Disorder Facilities.
In connection with the redemption of the 6.500% Senior Notes, we recorded debt extinguishment costs of $10.5 million, including $6.3 million cash paid for breakage costs and the write-off of deferred financing costs of $4.2 million in the consolidated statement of operations.
In connection with the redemption of the 6.500% Senior Notes, we recorded debt extinguishment costs of $10.5 million, including $6.3 million cash paid for breakage costs and the write-off of deferred financing costs of $4.2 million in the consolidated statement of operations. U.K.
Each conviction under the EKRA is punishable by up to $200,000 in monetary damages, imprisonment for up to ten (10) years, or both. Unlike the Anti-Kickback Statutes, the EKRA is not limited to services reimbursable under a government healthcare program.
Each conviction under EKRA is punishable by up to $200,000 in monetary damages, imprisonment for up to ten (10) years, or both. Unlike the Anti-Kickback Statute, EKRA is not limited to services reimbursable under a government healthcare program.
Environmental Matters We are subject to various federal, state and local environmental laws that: (i) regulate certain activities and operations that may have environmental or health and safety effects, such as the handling, storage, transportation, treatment and disposal of medical waste 11 Table of Contents products generated at our facilities, the identification and warning of the presence of asbestos-containing materials in buildings, as well as the removal of such materials, the presence of other hazardous subst ances in the indoor environment and protection of the environment and natural resources in connection with the development or construction of our facilities; (ii) impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances; and (iii) regulate workplace safety.
Environmental Matters We are subject to various federal, state and local environmental laws that: (i) regulate certain activities and operations that may have environmental or health and safety effects, such as the handling, storage, transportation, treatment and disposal of medical waste products generated at our facilities, the identification and warning of the presence of asbestos-containing materials in buildings, as well as the removal of such materials, the presence of other hazardous substances in the indoor environment and protection of the environment and natural resources in connection with the development or construction of our facilities; (ii) impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances; and (iii) regulate workplace safety.
As we receive Medicaid payments from 46 states, the District of Columbia and Puerto Rico, management does not believe that we are significantly affected by changes in reimbursement policies in any one state or territory.
As we receive Medicaid payments from 45 states, the District of Columbia and Puerto Rico, management does not believe that we are significantly affected by changes in reimbursement policies in any one state or territory.
Our group home programs provide family-style living for youths in a single house or apartment within residential communities where supervision and support are provided by 24-hour staff. The goal of a group home program is to teach family living and social skills through individual and group counseling sessions within a real life environment.
Our group home programs provide family-style living for youths in a single house or apartment within residential communities where 24-hour staff provide supervision and support. The goal of a group home program is to teach family living and social skills through individual and group counseling sessions within a real-life environment.
Our statutory workers’ compensation program is fully insured with a $0.5 million deductible per accident. 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 through August 31, 2022 and $5.0 million and $10.0 million for certain other claims thereafter.
Our statutory workers’ compensation program is fully insured with a $0.5 million deductible per accident. A portion of our professional liability risks are insured through a wholly-owned insurance subsidiary providing coverage for up to $5.0 million per claim and $10.0 million for certain other claims through August 31, 2023 and $7.0 million and $10.0 million for certain other claims thereafter.
These referral sources may instead refer patients to hospitals that are able to provide a full suite of medical services or to other behavioral healthcare centers. Human Capital At December 31, 2022, we had approximately 23,000 employees, of which 17,000 were employed full-time.
These referral sources may instead refer patients to hospitals that are able to provide a full suite of medical services or to other behavioral healthcare centers. Human Capital At December 31, 2023, we had approximately 23,500 employees, of which 17,000 were employed full-time.
Our eating disorder facilities provide treatment services for eating disorders and weight management, each of which may be effectively treated through a combination of medical, psychological and social treatment programs.
Our eating disorder facilities provide treatment services for eating disorders, each of which may be effectively treated through a combination of medical, psychological and social treatment programs.
No facility accounted for more than 4% of revenue for the year ended December 31, 2022, and no state or U.S. territory accounted for more than 14% of revenue for the year ended December 31, 2022.
No facility accounted for more than 4% of revenue for the year ended December 31, 2023, and no state or U.S. territory accounted for more than 14% of revenue for the year ended December 31, 2023.
Violations of the False Claims Act are punishable by significant penalties totaling $13,508 to $27,018 for each fraudulent claim plus three times the amount of damages sustained by the government. In addition, under the qui tam, or whistleblower, provisions of the False Claims Act, private parties may bring actions under the False Claims Act on behalf of the federal government.
Violations of the False Claims Act are punishable by significant penalties totaling $13,946 to $27,894 for each fraudulent claim plus three times the amount of damages sustained by the government. In addition, under the qui tam, or whistleblower, provisions of the False Claims Act, private parties may bring actions under the False Claims Act on behalf of the federal government.
Moreover, as the behavioral healthcare business does not typically require the procurement and replacement of expensive medical equipment, our maintenance capital expenditure requirements are generally less than that of other facility-based healthcare providers. For the year ended December 31, 2022, our maintenance capital expenditures amounted to approximately 2% of our revenue.
Moreover, as the behavioral healthcare business does not typically require the procurement and replacement of expensive medical equipment, our maintenance capital expenditure requirements are generally less than that of other facility-based healthcare providers. For the year ended December 31, 2023, our maintenance capital expenditures amounted to approximately 3% of our revenue.
The 21 st Century Cures Act appropriated substantial resources for the treatment of behavioral health and substance abuse disorders and contained measures intended to strengthen the MHPAEA. CARES Act and Other Regulatory Developments On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law.
The 21 st Century Cures Act appropriated substantial resources for the treatment of behavioral healthcare and substance abuse disorders and contained measures intended to strengthen the MHPAEA. CARES Act and Other Regulatory Matters On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law.
The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information we file. Our website and the information contained therein or linked thereto are not intended to be incorporated into this Annual Report on Form 10-K. 13 Table of Contents
The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information we file. Our website and the information contained therein or linked thereto are not intended to be incorporated into this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Revenue and Accounts Receivable” 6 Table of Contents for additional disclosure. Other information related to our revenue, income and other operating information is provided in our Consolidated Financial Statements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Revenue and Accounts Receivable” for additional disclosure. Other information related to our revenue, income and other operating information is provided in our Consolidated Financial Statements.
Among other things, the PPP Act allocates $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses.
Among other things, the PPP Act allocated $75 billion to eligible healthcare providers to help offset COVID-19 related losses and expenses.
Business Strategy Our strategy is to become the indispensable behavioral health 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.
Business Strategy Our 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 high-quality, cost-effective behavioral healthcare services, while growing our business and creating long-term value for our stockholders.
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.
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, providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count.
The $75 billion allocated under the PPP Act is in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and has been disbursed to providers under terms and conditions similar to the CARES Act funds. In 2020, we received approximately $34.9 million of the funds distributed from the PHSSE Fund.
The $75 billion allocated under the PPP Act was in addition to the $100 billion allocated to healthcare providers for the same purposes in the CARES Act and was disbursed to providers under terms and conditions similar to the CARES Act funds. In 2020, we received approximately $34.9 million of the funds distributed from the PHSSE Fund.
Management believes we continue to be in a strong position for investments in our facilities, expansion into new and existing markets and enhancement of our capabilities and infrastructure. We generate strong free cash flow by profitably operating our business and by actively managing our working capital.
Management believes we continue to be in a strong position for investments in our facilities, expansion into new and existing markets and enhancement of our capabilities and infrastructure. We generate strong returns by profitably operating our business and by actively managing our working capital.
The imposition of such penalties could have a material adverse effect on our business, financial condition or results of operations. 8 Table of Contents Federal False Claims Act and Other Fraud and Abuse Provisions The federal False Claims Act provides the government a tool to pursue healthcare providers for submitting false claims or requests for payment for healthcare items or services.
The imposition of such penalties could have a material adverse effect on our business, financial condition or results of operations. 7 Federal False Claims Act and Other Fraud and Abuse Provisions The federal False Claims Act provides the government with a tool to pursue healthcare providers for submitting false claims or requests for payment for healthcare items or services.
HITECH has strengthened certain HIPAA rules regarding the use and disclosure of PHI, extended certain HIPAA provisions to business associates and created security breach notification requirements including notifications to the individuals affected by the breach, the Department of Health and Human Services, and in certain cases, the media. HITECH has also increased maximum penalties for violations of HIPAA privacy rules.
HITECH has strengthened certain HIPAA rules regarding the use and disclosure of PHI, extended certain HIPAA provisions to business associates and created security breach notification requirements including notifications to the individuals affected by the breach, the HHS, and in certain cases, the media. HITECH has also increased maximum penalties for violations of HIPAA privacy rules.
On December 13, 2016 , then President Obama signed the 21st Century Cures Act. The 21 st Century Cures Act appropriates substantial resources for the treatment of behavioral health and substance abuse disorders and contains measures intended to strengthen the MHPAEA.
On December 13, 2016, then President Obama signed the 21st Century Cures Act. The 21st Century Cures Act appropriates substantial resources for the treatment of behavioral healthcare and substance abuse disorders and contains measures intended to strengthen the MHPAEA.
The table below presents the percentage of our total U.S. revenue attributed to each category for the year ended December 31, 2022: Facility/Service Revenue for the Year Ended December 31, 2022 Acute inpatient psychiatric facilities 51 % Specialty treatment facilities 22 % Comprehensive treatment centers 16 % Residential treatment centers 11 % 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 (iv) individual patients and clients.
The table below presents the percentage of our total revenue attributed to each category for the year ended December 31, 2023: Facility/Service Revenue for the Year Ended December 31, 2023 Acute inpatient psychiatric facilities 51 % Specialty treatment facilities 21 % Comprehensive treatment centers 17 % Residential treatment centers 11 % 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 the Centers for Medicare and Medicaid Services (“CMS”) and other programs; and (iv) individual patients and clients.
Diversified revenue and payor bases . At December 31, 2022, we operated 250 facilities in 39 states and Puerto Rico. Our payor, patient and geographic diversity mitigates the potential risk associated with any single facility.
Diversified revenue and payor bases . At December 31, 2023, we operated 253 facilities in 38 states and Puerto Rico. Our payor, patient and geographic diversity mitigates the potential risk associated with any single facility.
It also includes Individuals in Medicaid Deserve Care that is Appropriate and Responsible in its Execution Act , which suspends the current prohibition on using federal Medicaid funds to pay for substance use disorder treatment at inpatient treatment facilities with more than 16 beds and limits beneficiaries to no more than 30 days of inpatient treatment per 12 month period.
It also includes Individuals in Medicaid Deserve Care that is Appropriate and Responsible in its Execution Act, which suspends the current prohibition on using federal Medicaid funds to pay for substance use disorder treatment at inpatient treatment facilities with more than 16 beds and limits beneficiaries to no more than 30 days of inpatient treatment per 12-month period. 2 National footprint and scale with regional density and presence across multiple service lines .
During the year ended December 31, 2022, we added 560 beds, consisting of 290 added to existing facilities and 270 added through the opening of one wholly-owned facility and two joint venture facilities, and we opened seven comprehensive treatment centers (“CTCs”). We are the leading publicly traded pure-play provider of behavioral healthcare services in the United States (the “U.S.”).
During the year ended December 31, 2023, we added 595 beds, consisting of 302 added to existing facilities and 293 added through the opening of one wholly-owned facility and two joint venture facilities, and we opened six comprehensive treatment centers (“CTCs”). We are the leading publicly traded pure-play provider of behavioral healthcare services in the United States (the “U.S.”).
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 $75.0 million or $70.0 million for certain other claims in the aggregate.
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 $75.0 million or $70.0 million in the aggregate for certain other claims through August 31, 2023 and $78.0 million or $75.0 million in the aggregate for certain other claims thereafter.
The structure of this treatment phase is monitored by a primary therapist who works with each patient to integrate recovery skills and build a foundation of sobriety with a strong support system. Length of stay will vary depending on the patient’s needs with a minimum stay of 30 days and could be multiple months if needed.
The structure of this treatment phase is monitored by a primary therapist who works with each patient to integrate recovery skills and build a foundation of sobriety with a strong support system. Length of stay will vary depending on the patient’s needs.
For further discussion of the background of this matter and the CIA, see “Item 1A. Risk Factors— We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of the CIA”.
For further discussion of the background of this matter and the CIA, see “Item 1A. Risk Factors — We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our existing CIA or any similar agreements in the future”.
Under the CARES Act, we received a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022 and was eliminated effective July 1, 2022.
Under the CARES Act, we received a 2% increase in our facilities’ Medicare reimbursement rate as a result of the temporary suspension of Medicare sequestration from May 1, 2020 to March 31, 2022, which was reduced to 1% on April 1, 2022, and was eliminated effective July 1, 2022. 9 The CARES Act also provided for certain federal income and other tax changes.
W e have a number of potential joint ventures and acquisitions in various stages of development and consideration in the U.S. During the year ended December 31, 2022, we added 270 beds through the opening of one wholly-owned facility and two joint venture facilities, and we opened seven CTCs.
We have a number of potential acquisitions, joint ventures and wholly-owned de novo facilities in various stages of development and consideration in the U.S. During the year ended December 31, 2023, we added 293 beds through the opening of one wholly-owned facility and two joint venture facilities, and we opened six CTCs.
Healthcare providers were required to sign an attestation confirming receipt of the Provider Relief Fund funds and agree to the terms and conditions of payment.
Healthcare providers were required to sign an attestation confirming receipt of the PHSSE Fund amounts and agree to the terms and conditions of payment.
Under the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and healthcare costs related to COVID-19, and we were required to properly and fully document the use of these funds to the U.S. Department of Health and Human Services (“HHS”).
Under the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and healthcare costs related to COVID-19, and we were required to properly and fully document the use of these funds to the HHS.
We have also established a Diversity and Inclusion Council, a multidisciplinary group, to oversee and advance diversity and inclusion initiatives. Talent Acquisition, Development and Retention Our success is dependent on our ability to attract, develop and retain talented, dedicated employees. We are committed to being an employer of choice and offer a compelling total rewards program.
Talent Acquisition, Development and Retention Our success is dependent on our ability to attract, develop and retain talented, dedicated employees. We are committed to being an employer of choice and offer a compelling total rewards program.
In addition, management intends to increase bed counts in our existing facilities. We added 290 beds to existing facilities during the year ended December 31, 2022, and expect to add approximately 300 beds to existing facilities for the year ending December 31, 2023.
In addition, management intends to increase bed counts in our existing facilities. We added 302 beds to existing facilities during the year ended December 31, 2023 and expect to add more than 400 beds to existing facilities for the year ending December 31, 2024.
COVID-19 Impact During March 2020, the global pandemic of the novel coronavirus known as COVID-19 (“COVID-19”) began to affect our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. and U.K. economies and financial markets. At many of our facilities, employees and/or patients have tested positive for COVID-19.
During March 2020, COVID-19 began to affect our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. population, economy and financial markets. At many of our facilities, employees and/or patients have tested positive for COVID-19.
For the year ending December 31, 2023, we expect to open two wholly-owned facilities, two joint venture facilities and at least six CTCs. Management believes our focus on behavioral healthcare and history of completing acquisitions provides us with a strategic advantage in sourcing, evaluating and closing acquisitions.
For the year ending December 31, 2024, we expect to add approximately 800 beds through the opening of wholly-owned and joint venture facilities and open up to 14 CTCs. Management believes our focus on behavioral healthcare and history of completing acquisitions provides us with a strategic advantage in sourcing, evaluating and closing acquisitions.
For the year ended December 31, 2022, we received 51% of our revenue from continuing operations from Medicaid, 30% from commercial payors, 15% from Medicare and 4% from other payors.
For the year ended December 31, 2023, we received 54% of our revenue from continuing operations from Medicaid, 28% from commercial payors, 15% from Medicare and 3% from other payors.
Among other things, the CARES Act includes additional support for small businesses, expands unemployment benefits, makes forgivable loans available to small businesses, provides for certain federal income tax changes, and provides $500 billion for loans, loan guarantees, and other investments for or in U.S. businesses.
The CARES Act provided over $2 trillion in stimulus benefits for the U.S. economy. Among other things, the CARES Act included additional support for small businesses, expanded unemployment benefits, made forgivable loans available to small businesses, provided for certain federal income tax changes, and provided $500 billion for loans, loan guarantees, and other investments for or in U.S. businesses.
Management believes the market for behavioral services will continue to grow due to increased awareness of mental health and substance abuse conditions and treatment options. 2 Table of Contents While the growing awareness of mental health and substance abuse conditions is expected to accelerate demand for services, recent healthcare reform in the U.S. is expected to increase access to industry services as more people obtain insurance coverage.
While the growing awareness of mental health and substance abuse conditions is expected to accelerate demand for services, recent healthcare reform in the U.S. is expected to increase access to industry services as more people obtain insurance coverage.
At the time of the acquisition, CenterPointe operated four acute inpatient hospitals with 306 beds and ten outpatient locations primarily in Missouri. U.K. Sale On January 19, 2021, we completed the U.K.
At the time of the acquisition, CenterPointe operated four acute inpatient hospitals with 306 beds and ten outpatient locations primarily in Missouri.
Where that is the case, we cannot guarantee that applicable regulatory authorities will determine these financial arrangements do not violate the Anti-Kickback Statute or other applicable laws, including state anti-kickback laws.
Where that is the case, we cannot guarantee that applicable regulatory authorities will determine these financial arrangements do not violate the Anti-Kickback Statute or other applicable laws, including state anti-kickback laws, although we do structure such arrangements to meet as many of the safe harbor requirements as possible.
The Anti-Kickback Statute, the Stark Law and the Eliminating Kickbacks in Recovery Act The Anti-Kickback Statute prohibits healthcare providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration, in cash or in kind, as an inducement or reward for using, referring, ordering, recommending or arranging for referrals or orders of services or other items paid for by a government healthcare program.
Further, Medicare and Medicaid regulations, as well as commercial payor contracts, also provide for withholding or suspending payments in certain circumstances, which could adversely affect our cash flow. 6 The Anti-Kickback Statute, the Stark Law and the Eliminating Kickbacks in Recovery Act The Anti-Kickback Statute prohibits healthcare providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration, in cash or in kind, as an inducement or reward for using, referring, ordering, recommending or arranging for referrals or orders of services or other items paid for by a government healthcare program.
Our common stock is listed for trading on The NASDAQ Global Select Market under the symbol “ACHC.” Our principal executive offices are located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, and our telephone number is (615) 861-6000. Acquisitions On November 7, 2022, we acquired four CTCs located in Georgia from Brand New Start Treatment Centers (“Brand New Start”).
Our common stock is listed for trading on The NASDAQ Global Select Market under the symbol “ACHC.” Our principal executive offices are located at 6100 Tower Circle, Suite 1000, Franklin, Tennessee 37067, and our telephone number is (615) 861-6000.
Sale allowed us to reduce our indebtedness and focus on our U.S. operations. We report, for all periods presented, results of operations and cash flows of the U.K. operations as discontinued operations in the accompanying financial statements. See “U.K. Sale” below for additional details about the U.K. Sale.
Sale allowed us to reduce our indebtedness and focus on our U.S. operations. We report, for all periods presented, results of operations and cash flows of the U.K. operations as discontinued operations in the accompanying financial statements. Additional information about our U.K. operations and the U.K.’s behavioral healthcare industry can be found in our prior filings with the SEC.
For the year ended December 31, 2022, we received 51% of our revenue from Medicaid, 30% from commercial payors, 15% from Medicare and 4% from other payors. At December 31, 2022, our facilities included 250 behavioral healthcare facilities with approximately 11,000 beds in 39 states and Puerto Rico.
For the year ended December 31, 2023, we received 54% of our revenue from Medicaid, 28% from commercial payors, 15% from Medicare and 3% from other payors. At December 31, 2023, we operated 253 behavioral healthcare facilities with approximately 11,200 beds in 38 states and Puerto Rico.
Management believes we can improve efficiencies and increase operating margins by utilizing our management’s expertise and experience within existing programs and their expertise in improving performance at underperforming facilities.
Management believes we can improve efficiencies and increase operating margins by utilizing our management’s expertise and experience within existing programs and their expertise in improving performance at underperforming facilities. Management believes the efficiencies can be realized by investing in growth in strong markets, addressing capital-constrained facilities that have underperformed and improving management systems.
In addition, the CARES Act contains a number of provisions that are intended to assist healthcare providers as they combat the effects of the COVID-19 pandemic.
In addition, the CARES Act contained a number of provisions intended to assist healthcare providers combat the effects of the global pandemic of the novel coronavirus known as COVID-19 (“COVID-19”).
The Anti-Kickback Statute may be found to have been violated if at least one purpose of the remuneration is to induce or reward referrals.
The Anti-Kickback Statute may be found to have been violated if at least one purpose of the remuneration is to induce or reward referrals. A provider is not required to have actual knowledge or specific intent to commit a violation of the Anti-Kickback Statute to be found guilty of violating the law.
Sources of Revenue As of December 31, 2022, we received 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 (iv) individual patients and clients.
The ultimate goal is to reunite or place these children with their families or prepare them, when appropriate, for permanent placement with a relative or an adoptive family. 5 Sources of Revenue As of December 31, 2023, we received 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 have positioned the C ompany as a leading provider of mental health services in the U.S . The behavioral healthcare industry in the U.S. is highly fragmented, and we selectively seek opportunities to expand and diversify our base of operations by acquiring additional facilities and entering into partnerships with healthcare providers to acquire and develop additional facilities.
The behavioral healthcare industry in the U.S. is highly fragmented, and we selectively seek opportunities to expand and diversify our base of operations by acquiring additional facilities, entering into partnerships with healthcare providers to develop additional facilities and developing wholly-owned de novo facilities in attractive markets.
We repaid half of the $39.3 million of payroll tax deferrals during the third quarter of 2021 and repaid the remaining portion in the third quarter of 2022 to eliminate the liability.
We received a cash benefit of approximately $39.3 million for 2020 relating to the delay of payment of the employer portion of Social Security payroll taxes. We repaid half of the $39.3 million of payroll tax deferrals during the third quarter of 2021 and repaid the remaining portion in the third quarter of 2022 to eliminate the liability.
Approximately 74% of our employees are women and approximately 48% are people of color. We have policies that strictly prohibit any discrimination on the basis of race, color, national origin, age, religion, disability, gender, marital status, veteran status or any other basis prohibited by federal, state or local law.
We have policies that strictly prohibit any discrimination on the basis of race, color, national origin, age, religion, disability, gender, marital status, veteran status or any other basis prohibited by federal, state or local law. We have also established a Diversity and Inclusion Council, a multidisciplinary group, to oversee and advance diversity and inclusion initiatives.
The reporting of the funds is subject to future audit for compliance with the terms and conditions. We recognized Provider Relief Fund funds to the extent we had qualifying COVID-19 expenses or lost revenues as permitted under the terms and conditions.
The reporting of the funds is subject to future audit for compliance with the terms and conditions. We recognized PHSSE Fund amounts to the extent we had qualifying COVID-19 expenses or lost revenues as permitted under the terms and conditions. During 2020, we applied for and received approximately $45.2 million of payments from the CMS Accelerated and Advance Payment Program.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese provisions include: • a classified board of directors; • a prohibition on stockholder action through written consent; • a requirement that special meetings of stockholders be called only upon a resolution approved by a majority of our directors then in office; • advance notice requirements for stockholder proposals and nominations; and • the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine.
Biggest changeThese provisions include: • a classified board of directors; • a prohibition on stockholder action through written consent; • a requirement that special meetings of stockholders be called only upon a resolution approved by a majority of our directors then in office; • advance notice requirements for stockholder proposals and nominations; and • the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine. 30 Section 203 of the Delaware General Corporation Law (the “DGCL”) prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person that together with its affiliates owns or within the last three years has owned 15% of voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Although we have in place policies and procedures to prevent such breaches, breaches could occur either as a result of a breach by our employees or as a result of a breach by a third party to whom we have provided sensitive personal data, and we could face liability under data protection laws.
Although we have in place policies and procedures to prevent such breaches, breaches could occur either as a result of a breach by our employees or as a result of a breach by a third-party to whom we have provided sensitive personal data. We could face liability under data protection laws.
Among the laws applicable to our operations are the federal Anti-Kickback Statute, the Stark Law, the federal False Claims Act, the EKRA, and similar state laws. These laws impact the relationships that we may have with physicians and other potential referral sources.
Among the laws applicable to our operations are the federal Anti-Kickback Statute, the Stark Law, the federal False Claims Act, EKRA, and similar state laws. These laws impact the relationships that we may have with physicians and other potential referral sources.
General Risk Factors • Fluctuations in our operating results, quarter to quarter earnings and other factors, including factors outside our control, may result in significant decreases in the price of our common stock. • Future sales of common stock by our existing stockholders may cause our stock price to fall. • If securities or industry analysts do not publish research or reports about our business, if they were to change their recommendations regarding our stock adversely or if our operating results do not meet their expectations, our stock price and trading volume could decline. • We incur substantial costs as a result of being a public company.
General Risk Factors • Fluctuations in our operating results, quarter to quarter earnings and other factors, including factors outside our control, may result in significant decreases in the price of our common stock. 13 • Future sales of common stock by our existing stockholders may cause our stock price to fall. • If securities or industry analysts do not publish research or reports about our business, if they were to change their recommendations regarding our stock adversely or if our operating results do not meet their expectations, our stock price and trading volume could decline. • We incur substantial costs as a result of being a public company.
In the event of such default, the holders of such debt could elect to declare all the funds borrowed thereunder to be due and payable, the lenders under the New Credit Facility could elect to terminate their commitments or cease making further loans and institute foreclosure proceedings against our assets, or we could be forced to apply all available cash flows to repay such debt, and, in any such case, we could ultimately be forced into bankruptcy or liquidation.
In the event of such default, the holders of such debt could elect to declare all the funds borrowed thereunder to be due and payable, the lenders under the Credit Facility could elect to terminate their commitments or cease making further loans and institute foreclosure proceedings against our assets, or we could be forced to apply all available cash flows to repay such debt, and, in any such case, we could ultimately be forced into bankruptcy or liquidation.
If we are unable to generate sufficient cash flows and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our debt, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our debt (including the New Credit Facility and the indentures governing the Senior Notes), we would be in default under the terms of the agreements governing such debt.
If we are unable to generate sufficient cash flows and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our debt, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our debt (including the Credit Facility and the indentures governing the Senior Notes), we would be in default under the terms of the agreements governing such debt.
Although we evaluate the financial feasibility of construction projects by determining whether the projected cash flow return on investment exceeds our cost of capital and have implemented efforts to realize efficiencies in our design and construction processes, such returns may not be achieved if the cost of construction continues to rise significantly or the expected patient volumes are not attained.
Although we evaluate the financial feasibility of construction projects by determining whether the projected cash flow return on investment exceeds our cost of capital and have implemented efforts to realize efficiencies in our design and construction processes, 22 such returns may not be achieved if the cost of construction continues to rise significantly or the expected patient volumes are not attained.
A sustained economic downturn or other economic conditions could also adversely affect the counterparties to our agreements, including the lenders under the New Credit Facility, causing them to fail to meet their obligations to us. Increases in inflation and rising interest rates may adversely impact our business, financial condition and results of operations.
A sustained economic downturn or other economic conditions could also adversely affect the counterparties to our agreements, including the lenders under the Credit Facility, causing them to fail to meet their obligations to us. Increases in inflation and rising interest rates may adversely impact our business, financial condition and results of operations.
The breach of any of these covenants and restrictions could result in a default under the indentures governing the Senior Notes or under the New Credit Facility, which could result in an acceleration of our debt. Despite our current debt level, we may incur significant additional amounts of debt, which could further exacerbate the risks associated with our debt.
The breach of any of these covenants and restrictions could result in a default under the indentures governing the Senior Notes or under the Credit Facility, which could result in an acceleration of our debt. Despite our current debt level, we may incur significant additional amounts of debt, which could further exacerbate the risks associated with our debt.
Some of our for-profit competitors are local, independent operators or physician groups with strong established reputations within the surrounding communities, which may adversely affect our ability to attract a sufficiently large number of patients in markets where we compete with such providers.
Some of our for-profit competitors are local, independent operators or physician groups with 24 strong established reputations within the surrounding communities, which may adversely affect our ability to attract a sufficiently large number of patients in markets where we compete with such providers.
Property owners and local authorities have attempted, and may in the future attempt, to use or enact zoning ordinances to eliminate our ability to operate a given treatment facility or program. Local governmental authorities in some cases also have attempted to use litigation and the threat of prosecution to force the closure of certain comprehensive treatment facilities.
Property owners and local authorities have attempted, and may in the future attempt, to use or enact zoning ordinances to eliminate our ability to operate a given treatment facility or program. Local governmental authorities in some cases also have 28 attempted to use litigation and the threat of prosecution to force the closure of certain comprehensive treatment facilities.
In addition, our relationships with not-for-profit healthcare systems and the joint venture agreements that govern these relationships are intended to be structured to comply with current revenue rulings published by the Internal Revenue Service (“IRS”), as well as case law relevant to joint ventures between for-profit and not-for-profit healthcare entities.
In addition, our relationships with not-for-profit healthcare systems and the joint venture agreements that govern these relationships are intended to be structured to comply with current revenue rulings published by the Internal Revenue Service, as well as case law relevant to joint ventures between for-profit and not-for-profit healthcare entities.
Any default under the agreements governing our debt, including a default under the New Credit Facility or the indentures governing our Senior Notes, and the remedies sought by the holders of such debt, could adversely affect our ability to pay the principal, premium, if any, and interest on the Senior Notes and substantially decrease the market value of the Senior Notes.
Any default under the agreements governing our debt, including a default under the Credit Facility or the indentures governing the Senior Notes, and the remedies sought by the holders of such debt, could adversely affect our ability to pay the principal, premium, if any, and interest on the Senior Notes and substantially decrease the market value of the Senior Notes.
Further, the cost of an acquisition could result in a dilutive effect on our results of operations, depending on various factors, including the amount paid for an acquired facility, the acquired facility’s results of operations, the fair value of assets acquired and liabilities assumed, effects of subsequent legislation and limits on rate increases.
Further, the 21 cost of an acquisition could result in a dilutive effect on our results of operations, depending on various factors, including the amount paid for an acquired facility, the acquired facility’s results of operations, the fair value of assets acquired and liabilities assumed, effects of subsequent legislation and limits on rate increases.
The storage and transportation of such waste is strictly regulated. Our waste disposal services are outsourced and should the relevant service provider fail to comply with relevant regulations, we could face sanctions or fines which could adversely affect our brand, reputation, business or financial condition.
The storage and transportation of such waste is strictly regulated. Our waste disposal services are outsourced and should the relevant service provider fail to comply with relevant regulations, we could face sanctions or fines which 23 could adversely affect our brand, reputation, business or financial condition.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the New Credit Facility or from other sources in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Credit Facility or from other sources in an amount sufficient to enable us to service our debt or to fund our other liquidity needs.
Operational Risks An incident involving one or more of our patients or the failure by one or more of our facilities to provide appropriate care could result in increased regulatory burdens, governmental investigations, negative publicity and adversely affect the trading price of our common stock.
Operational Risks An incident involving one or more of our patients or the failure by one or more of our facilities to provide appropriate care could result in increased regulatory burdens, governmental investigations, litigation, negative publicity and adversely affect the trading price of our common stock.
Our failure either to recruit and retain qualified management, psychiatrists, therapists, counselors, nurses and other medical support personnel or control our labor costs could have a material adverse effect on our results of operations. Our performance depends on our ability to recruit and retain quality psychiatrists and other physicians.
Our failure either to recruit and 25 retain qualified management, psychiatrists, therapists, counselors, nurses and other medical support personnel or control our labor costs could have a material adverse effect on our results of operations. Our performance depends on our ability to recruit and retain quality psychiatrists and other physicians.
The incurrence of substantial legal fees, damage awards or other fines as well as the potential impact on our brand or reputation as a result of being involved in any legal proceedings could have a material adverse impact on our business, results of operations and financial condition.
The incurrence of substantial legal fees, damage awards or other fines as well as the potential impact on our brand or reputation as a result of being involved in any legal proceedings could have a material impact on our business, results of operations and financial condition.
Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We are subject to a number of restrictive covenants, which may restrict our business and financing activities.
Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. 15 We are subject to a number of restrictive covenants, which may restrict our business and financing activities.
The New Credit Facility also requires us to meet certain financial ratios, including a fixed charge coverage ratio and a consolidated leverage ratio. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources —New Credit Facility”.
The Credit Facility also requires us to meet certain financial ratios, including a fixed charge coverage ratio and a consolidated leverage ratio. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facility”.
In the event of a security breach, sensitive personal data could become public. We are currently not aware of any material incidences of potential data breach; however, there can be no assurance that such breaches will not arise in future.
In the event of a security breach, sensitive personal data could become public. We are currently not aware of any material incidences of potential data breach; however, there can be no 27 assurance that such breaches will not arise in the future.
Business closings and layoffs in the areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services as rendered.
Business closings and layoffs in the areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other 18 payors to pay for services as rendered.
If these audits identify overpayments, we could be required to make substantial repayments, subject to various appeal rights. Our facilities are routinely subjected to claims audits in the ordinary course of business.
If these audits identify overpayments, we could be required to make substantial repayments, subject to various appeal rights. Our facilities are routinely subjected to claims audits in the ordinary 14 course of business.
That is because liability for contamination under certain environmental laws can be imposed on current or past owners, lessors or operators of a site without regard to fault.
That is because liability 29 for contamination under certain environmental laws can be imposed on current or past owners, lessors or operators of a site without regard to fault.
For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • make it more difficult for us to satisfy our other financial obligations; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt (including scheduled repayments on our outstanding term loan borrowings under the New Credit Facility), thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; • expose us to interest rate fluctuations because the interest on the New Credit Facility is imposed at variable rates; • make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such debt; 16 Table of Contents • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a competitive disadvantage compared to our competitors that have less debt; • limit our ability to borrow additional funds; and • limit our ability to pay dividends, redeem stock or make other distributions.
For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • make it more difficult for us to satisfy our other financial obligations; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a substantial portion of our cash flow from operations to payments on our debt (including scheduled repayments on our outstanding term loan borrowings under the Credit Facility), thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; • expose us to interest rate fluctuations because the interest on the Credit Facility is imposed at variable rates; • make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such debt; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a competitive disadvantage compared to our competitors that have less debt; • limit our ability to borrow additional funds; and • limit our ability to pay dividends, redeem stock or make other distributions.
Companies operating in the behavioral healthcare industry in the U.S. are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things: billing practices and prices for services; relationships with physicians and other referral sources; necessity and quality of medical care; condition and adequacy of facilities; qualifications of medical and support personnel; confidentiality, privacy and security issues associated with health-related 29 Table of Contents information and PHI; EMTALA compliance; handling of controlled substances; certification, licensure and accreditation of our facilities; operating policies and procedures; activities regarding competitors; state and local land use and zoning requirements; and addition or expansion of facilities and services.
Companies operating in the behavioral healthcare industry in the U.S. are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things: billing practices and prices for services; relationships with physicians and other referral sources; necessity and quality of medical care; condition and adequacy of facilities; qualifications of medical and support personnel; confidentiality, privacy and security issues associated with health-related information and PHI; EMTALA compliance; handling of controlled substances; certification, licensure and accreditation of our facilities; operating policies and procedures; activities regarding competitors; state and local land use and zoning requirements; and addition or expansion of facilities and services.
Factors such as increased acuity of our patients, health and safety incidents at our facilities, regulatory enforcement actions, negative press or general customer dissatisfaction could lead to deterioration in the level of our quality ratings or the public perception of the quality of our services (including as a result of negative publicity about our industry generally), which in turn could lead to a loss of patient placements, referrals and self-pay patients or service users.
Factors such as increased acuity of our patients, health and safety incidents at our facilities, regulatory enforcement actions, negative press, civil liability or general customer dissatisfaction could lead to deterioration in the level of our quality ratings or the public perception of the quality of our services (including as a result of negative publicity about our industry generally), which in turn could lead to a loss of patient placements, referrals and self-pay patients or service users.
If we fail to cultivate new or maintain established relationships with referral sources, our business, financial condition or results of operations could be adversely affected.
If we fail to cultivate new or maintain established relationships with referral sources, our business, financial condition and results of operations could be adversely affected.
Our ability to access the capital markets on acceptable terms may be severely restricted at a time when we would like, or need, access to those markets, which could have a negative impact on our growth plans, our flexibility to react to changing economic and business conditions and our ability to refinance existing debt (including debt under the New Credit Facility and the Senior Notes).
Our ability to access the capital markets on acceptable terms may be severely restricted at a time when we would like, or need, access to those markets, which could have a negative impact on our growth plans, our flexibility to react to changing economic and business conditions and our ability to refinance existing debt (including debt under 17 the Credit Facility and the Senior Notes).
Item 1A. Risk Factors Risk Factors Summary We are subject to a variety of risks and uncertainties, including financial risks, operational risks, human capital risks, legal proceedings and regulatory risks and certain general risks, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Item 1A. Ri sk Factors Risk Factors Summary We are subject to a variety of risks and uncertainties, including financial risks, operational risks, human capital risks, legal proceedings and regulatory risks and certain general risks, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Although there were no impairment charges recorded for the 2022 annual impairment review, we may be required to record charges to earnings during any period in which an impairment of our goodwill, intangible assets and property and equipment is determined which could adversely affect our results of operations.
Although there were no impairment charges recorded for the 2023 annual impairment review, we may be required to record charges to earnings during any period in which an impairment of our goodwill, intangible assets and property and equipment is determined which could adversely affect our results of operations.
The loss of the services of one or more of our senior executives or our facility management personnel could significantly undermine our management expertise and our ability to provide efficient, quality healthcare services at our facilities, which could have a material adverse effect on our business, results of operations and financial condition.
In addition, the loss of the services of one or more of our senior executives or our facility management personnel could significantly undermine our management expertise and our ability to provide efficient, quality healthcare services at our facilities, which could have a material adverse effect on our business, results of operations and financial condition.
Risks that we deem material are described under “Risk Factors” below and include, but are not limited to, the following: Financial Risks • Our revenue and results of operations are significantly affected by payments received from the government and third-party payors. • Our debt could adversely affect our financial health and prevent us from fulfilling our obligations under our financing arrangements. • Servicing our debt will require a significant amount of cash.
Risks that we deem material are described under “Risk Factors” below and include, but are not limited to, the following: Financial Risks • Our revenue and results of operations are significantly affected by payments received from the government and third-party payors. • Our debt could adversely affect our financial health and prevent us from fulfilling our obligations under our financing arrangements. • Servicing our debt requires a significant amount of cash.
We are unable at this time to predict how this trend will affect our results of operations, but it could negatively impact our revenue if we are unable to meet quality standards established by both governmental and private payers. 19 Table of Contents The trend by insurance companies and managed care organizations to enter into sole-source contracts may limit our ability to obtain patients.
We are unable at this time to predict how this trend will affect our results of operations, but it could negatively impact our revenue if we are unable to meet quality standards established by both governmental and private payers. The trend by insurance companies and managed care organizations to enter into sole-source contracts may limit our ability to obtain patients.
See Note 20— Commitments and Contingencies in the accompanying notes to our consolidated financial statements beginning on Page F-1 of this Annual Report on Form 10-K for additional information about pending investigations.
See Note 11 — Commitments and Contingencies in the accompanying notes to our consolidated financial statements beginning on Page F-1 of this Annual Report on Form 10-K for additional information about pending investigations.
Our failure to obtain necessary state approval could (i) result in our inability to acquire a targeted facility, complete a desired expansion or make a desired replacement, (ii) make a 31 Table of Contents facility ineligible to receive reimbursement under the Medicare or Medicaid programs or (iii) result in the revocation of a facility’s license or imposition of civil or criminal penalties, any of which could harm our business.
Our failure to obtain necessary state approval could (i) result in our inability to acquire a targeted facility, complete a desired expansion or make a desired replacement, (ii) make a facility ineligible to receive reimbursement under the Medicare or Medicaid programs or (iii) result in the revocation of a facility’s license or imposition of civil or criminal penalties, any of which could harm our business.
Therefore, if governmental entities reduce the amounts they will pay 15 Table of Contents for our services, if they elect not to continue paying for such services altogether, or if there is a significant contraction of the number of individuals covered by state Medicaid programs, our business, financial condition or results of operations could be adversely affected.
Therefore, if governmental entities reduce the amounts they will pay for our services, if they elect not to continue paying for such services altogether, or if there is a significant contraction of the number of individuals covered by state Medicaid programs, our business, financial condition or results of operations could be adversely affected.
Any impairment of our reputation, loss of goodwill or damage to the value of our brand name could have a material 23 Table of Contents adverse effect on our business, results of operations and financial condition. Many of our service users have complex medical conditions or special needs, are vulnerable and often require a substantial level of care and supervision.
Any impairment of our reputation, loss of goodwill or damage to the value of our brand name could have a material adverse effect on our business, results of operations and financial condition. Many of our service users have complex medical conditions or special needs, are vulnerable and often require a substantial level of care and supervision.
As a result, any increase in our operating costs could have a material adverse effect on our business, results of operations and financial condition. 18 Table of Contents We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control.
As a result, any increase in our operating costs could have a material adverse effect on our business, results of operations and financial condition. We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control.
Any failure in or breach of our IT systems could adversely impact our business, results of operations and financial condition. 24 Table of Contents If we do not continually enhance our facilities with the most recent technological advances, our ability to maintain and expand our markets will be adversely affected.
Any failure in or breach of our IT systems could adversely impact our business, results of operations and financial condition. If we do not continually enhance our facilities with the most recent technological advances, our ability to maintain and expand our markets will be adversely affected.
Our ability to generate sufficient cash to service our debt depends on many factors beyond our control. • We are subject to a number of restrictive covenants, which may restrict our business and financing activities. • Despite our current debt level, we may incur significant additional amounts of debt, which could further exacerbate the risks associated with our debt. • If we default on our obligations to pay our debt, we may not be able to make payments on our financing arrangements. • We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control. • Increases in inflation and rising interest rates may adversely impact our business, financial condition and results of operations. • The industry trend on value-based purchasing may negatively impact our revenue. • The COVID-19 global pandemic continues to impact our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time or if patient volumes decline at our facilities. • An increase in uninsured or underinsured patients or the deterioration in the collectability of patient accounts receivables could harm our results of operation.
Our ability to generate sufficient cash to service our debt depends on many factors beyond our control. • We are subject to a number of restrictive covenants, which may restrict our business and financing activities. • Despite our current debt level, we may incur significant additional amounts of debt, which could further exacerbate the risks associated with our debt. • If we default on our obligations to pay our debt, we may not be able to make payments on our financing arrangements. • We are subject to volatility in the global capital and credit markets as well as significant developments in macroeconomic and political conditions that are out of our control. • Increases in inflation and rising interest rates may adversely impact our business, financial condition and results of operations. 12 • The industry trend on value-based purchasing may negatively impact our revenue. • Although the COVID-19 public health emergency expired in May 2023, our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time or if patient volumes decline at our facilities. • An increase in uninsured or underinsured patients or the deterioration in the collectability of patient accounts receivables could harm our results of operation.
Although the indentures governing our outstanding Senior Notes and the New Credit Facility contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial.
Although the indentures governing the Senior Notes and the Credit Facility contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial.
During the second quarter of 2019, we reached a settlement with the U.S. Attorney’s Office for the Southern District of West Virginia relating to the manner in which seven of our CTCs in West Virginia had historically billed lab claims to the West Virginia 28 Table of Contents Medicaid Program.
During the second quarter of 2019, we reached a settlement with the U.S. Attorney’s Office for the Southern District of West Virginia relating to the manner in which seven of our CTCs in West Virginia had historically billed lab claims to the West Virginia Medicaid Program.
Inflation in the U.S. has recently accelerated and is currently expected to continue at an elevated level in the near-term. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflict between the Ukraine and Russia.
Inflation in the U.S. has recently accelerated and is currently expected to continue at an elevated level in the near-term. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflicts between Ukraine and Russia and in Israel and Gaza.
Operational Risks • An incident involving one or more of our patients or the failure by one or more of our facilities to provide appropriate care could result in increased regulatory burdens, governmental investigations, negative publicity and adversely affect the trading price of our common stock. • Our business growth and acquisition strategies expose us to a variety of operational and financial risks. • Joint ventures may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities. • We care for a large number of vulnerable individuals with complex needs and any care quality deficiencies could adversely impact our brand, reputation and ability to market our services effectively. • Our business could be disrupted if our information systems fail or if our databases are destroyed or damaged. • A disruption to our information technology systems or a cyber security incident could have a material adverse impact on the Company, including substantial sanctions, fines, and damages and civil and criminal penalties under federal and state privacy laws, in addition to reputational harm and increased costs. • Although we have facilities in 39 states and Puerto Rico, we have substantial operations in Pennsylvania, California, Arizona and Tennessee, which makes us especially sensitive to regulatory, economic, environmental and competitive conditions and changes in those locations. • Our business and operations are subject to risks related to natural disasters and climate change. 14 Table of Contents • If we fail to cultivate new or maintain established relationships with referral sources, our business, financial condition or results of operations could be adversely affected. • We operate in a highly competitive industry, and competition may lead to declines in patient volumes.
Operational Risks • An incident involving one or more of our patients or the failure by one or more of our facilities to provide appropriate care could result in increased regulatory burdens, governmental investigations, litigation, negative publicity and adversely affect the trading price of our common stock. • Joint ventures may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities. • Our business growth and acquisition strategies expose us to a variety of operational and financial risks. • We care for a large number of vulnerable individuals with complex needs and any care quality deficiencies could adversely impact our brand, reputation and ability to market our services effectively. • Our business could be disrupted if our information systems fail or if our databases are destroyed or damaged. • A cybersecurity incident could have a material adverse impact on the Company, including substantial sanctions, fines, and damages and civil and criminal penalties under federal and state privacy laws, in addition to reputational harm and increased costs. • Although we have facilities in 38 states and Puerto Rico, we have substantial operations in Pennsylvania, California, Tennessee, Massachusetts, and Arizona, which makes us especially sensitive to regulatory, economic, environmental and competitive conditions and changes in those states. • Our business and operations are subject to risks related to natural disasters and climate change. • If we fail to cultivate new or maintain established relationships with referral sources, our business, financial condition and results of operations could be adversely affected. • We operate in a highly competitive industry, and competition may lead to declines in patient volumes.
Although we 27 Table of Contents employ psychiatrists and other physicians at many of our facilities, psychiatrists and other physicians generally are not employees of our facilities, and, in a number of our markets, they have admitting privileges at competing hospitals providing acute or inpatient behavioral healthcare services.
Although we employ psychiatrists and other physicians at many of our facilities, psychiatrists and other physicians generally are not employees of our facilities, and, in a number of our markets, they have admitting privileges at competing hospitals providing acute or inpatient behavioral healthcare services.
Legal Proceedings and Regulatory Risks • We are and in the future could become the subject of additional governmental investigations, regulatory actions and whistleblower lawsuits. • We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of the CIA. • We are and in the future may become involved in legal proceedings based on negligence or breach of a contractual or statutory duty from service users or their family members or from employees or former employees. • If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations. • We could face risks associated with, or arising out of, environmental, health and safety laws and regulations.
Legal Proceedings and Regulatory Risks • We are and in the future could become the subject of additional governmental investigations, regulatory actions and whistleblower lawsuits. • We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our existing CIA, or any similar agreements in the future. • We are and in the future may become involved in legal proceedings based on negligence or breach of a contractual or statutory duty from service users or their family members or from employees or former employees. • If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations. • We could face risks associated with, or arising out of changing laws and regulations, including those involving environmental, health and safety laws and regulations.
Our ability to comply with these covenants in future periods will largely depend on the pricing of 17 Table of Contents our products and services, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy.
Our ability to comply with these covenants in future periods will largely depend on the pricing of our products and services, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy.
A cyber security incident could have a material adverse impact on the Company, including substantial sanctions, fines, and damages and civil and criminal penalties under federal and state privacy laws, in addition to reputational harm and increased costs.
A cybersecurity incident could have a material adverse impact on the Company, including substantial sanctions, fines, and damages and civil and criminal penalties under federal and state privacy laws, in addition to reputational harm and increased costs.
At December 31, 2022, our estimated implicit price concessions represented approximately 15% of our accounts receivable balance as of such date. Significant changes in business office operations, payor mix, economic conditions or trends in federal and state governmental health coverage could affect our collection of accounts receivable, cash flow and results of operations.
At December 31, 2023, our estimated implicit price concessions represented approximately 16% of our accounts receivable balance as of such date. Significant changes in business office operations, payor mix, economic conditions or trends in federal and state governmental health coverage could affect our collection of accounts receivable, cash flow and results of operations.
For the year ended December 31, 2022, we derived approximately 66% of our continuing operations revenue from the Medicare and Medicaid programs. Government payors in the U.S., such as Medicaid, generally reimburse us on a fee-for-service basis based on predetermined reimbursement rate schedules.
For the year ended December 31, 2023, we derived approximately 69% of our continuing operations revenue from the Medicare and Medicaid programs. Government payors in the U.S., such as Medicaid, generally reimburse us on a fee-for-service basis based on predetermined reimbursement rate schedules.
There can be no assurances that we will be able to acquire facilities at historical or expected rates or on favorable terms. 22 Table of Contents Antitrust and other legal challenges We may face antitrust and other legal challenges when acquiring facilities or other businesses, which could negatively impact our ability to close acquisition transactions.
There can be no assurances that we will be able to acquire facilities at historical or expected rates or on favorable terms. Antitrust and other legal challenges We may face antitrust and other legal challenges when acquiring facilities or other businesses, which could negatively impact our ability to close acquisition transactions.
Revenue from Pennsylvania, California, Arizona and Tennessee represented approximately 13%, 8%, 6% and 6% of our total revenue for the year ended December 31, 2022, respectively. This concentration makes us particularly sensitive to legislative, regulatory, economic, environmental and competition changes in those states.
Revenue from Pennsylvania, California, Tennessee, Massachusetts and Arizona represented approximately 13%, 8%, 7%, 6% and 6% of our total revenue for the year ended December 31, 2023, respectively. This concentration makes us particularly sensitive to legislative, regulatory, economic, environmental and competition changes in those states.
Such shortages could lead to us paying higher prices for supplies, equipment and labor and an increase in overtime hours paid to our employees. The steps we have taken to mitigate the financial impact of COVID-19, see “Item 1. Business — COVID-19 Impact,” may not be successful, and we could experience material decreases in Adjusted EBITDA in 2023 or longer.
Such shortages could lead to us paying higher prices for supplies, equipment and labor and an increase in overtime hours paid to our employees. The steps we have taken to mitigate the financial impact of COVID-19 may not be successful, and we could experience material decreases in Adjusted EBITDA in 2023 or longer.
Accordingly, the 32 Table of Contents provision in our amended and restated certificate of incorporation that adopts a modified version of Section 203 of the DGCL may discourage, delay or prevent a change in control of us.
Accordingly, the provision in our amended and restated certificate of incorporation that adopts a modified version of Section 203 of the DGCL may discourage, delay or prevent a change in control of us.
If one or more of our facilities experiences an adverse patient incident or is found to have failed to provide appropriate patient care, an admissions hold, loss of accreditation, license revocation or other adverse regulatory action could be taken against us.
If one or more of our facilities experiences an adverse patient incident in the future or is found to have failed to provide appropriate patient care, an admissions hold, loss of accreditation, license revocation or other adverse regulatory 19 action could be taken against us.
State licensing standards require many of our facilities to have minimum staffing levels; minimum amounts of residential space per student or patient 30 Table of Contents and adhere to other minimum standards. Local regulations require us to follow land use guidelines at many of our fa cilities, including those pertaining to fire safety, sewer capacity and other physical plant matters.
State licensing standards require many of our facilities to have minimum staffing levels; minimum amounts of residential space per student or patient and adhere to other minimum standards. Local regulations require us to follow land use guidelines at many of our facilities, including those pertaining to fire safety, sewer capacity and other physical plant matters.
In periods of high unemployment, we also face the risk of potential declines in the population covered under private insurance, patient decisions to postpone or decide against receiving behavioral healthcare services, potential increases in the uninsured and underinsured populations we serve and further difficulties in collecting patient co-payment and deductible receivables.
In periods of high unemployment, we have faced and could continue to face the risk of potential declines in the population covered under private insurance, patient decisions to postpone or decide against receiving behavioral healthcare services, potential increases in the uninsured and underinsured populations we serve and further difficulties in collecting patient co-payment and deductible receivables.
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 20 Table of Contents collection experience.
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.
Our business growth and acquisition strategies expose us to a variety of operational and financial risks. A principal element of our business strategy is to grow by acquiring other companies and assets in the behavioral healthcare industry. Growth through acquisitions exposes us to a variety of operational and financial risks. We summarize the most significant of these risks below.
Our business growth and acquisition strategies expose us to a variety of operational and financial risks. A principal element of our business strategy is to grow by acquiring other companies and assets in the behavioral healthcare industry. Growth through acquisitions exposes us to a variety of operational and financial risks.
Business—Financing Transactions” for additional details regarding our outstanding indebtedness. Our debt could have important consequences to our business.
See “Item 1. Business — Financing Transactions” for additional details regarding our outstanding indebtedness. Our debt could have important consequences to our business.
There may also be claims in excess of our insurance coverage or claims which are not covered by our insurance due to other policy limitations or exclusions or where we have failed to comply with the terms of the policy.
As was the case with the Desert Hills Litigation, there may also be claims in excess of our insurance coverage or claims which are not covered by our insurance due to other policy limitations or exclusions or where we have failed to comply with the terms of the policy.
Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts, including the New Credit Facility and the Senior Notes. Servicing our debt will require a significant amount of cash.
Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts, including the Credit Facility and the Senior Notes (as defined below). Servicing our debt requires a significant amount of cash.
The global pandemic of COVID-19 is affecting our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. economy and financial markets. During 2020, 2021 and 2022 COVID-19 resulted in fewer referrals to our facilities and lower voluntary admissions as individuals were less inclined to leave their homes and seek treatment.
The global pandemic of COVID-19 has affected our facilities, employees, patients, communities, business operations and financial performance, as well as the broader U.S. economy and financial markets. Since 2020, COVID-19 resulted in fewer referrals to our facilities and lower voluntary admissions as individuals were less inclined to leave their homes and seek treatment.
We may also be subject to substantial reputational harm as a result of the public announcement of any investigation into such claims. We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of the CIA.
We may also be subject to substantial reputational harm as a result of the public announcement of any investigation into such claims. 26 We could be subject to monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our existing CIA or any similar agreements in the future.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. Item 1B. Unresolved Staff Comments. None. 33 Table of Contents
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. 31 Item 1B. Unresolv ed Staff Comments. None.
We may be required to record additional charges to future earnings if our goodwill, intangible assets and property and equipment become impaired. We are required under U.S. generally accepted accounting principles (“GAAP”) to review annually, or more frequently if events indicate the carrying value of a reporting unit may not be recoverable, our goodwill and indefinite-lived intangible assets for impairment.
We are required under U.S. generally accepted accounting principles (“GAAP”) to review annually, or more frequently if events indicate the carrying value of a reporting unit may not be recoverable, our goodwill and indefinite-lived intangible assets for impairment.
Our business can be affected by a number of factors that are beyond our control, such as general macroeconomic conditions, conditions in the financial services markets, geopolitical conditions and other general political and economic developments.
Our business has in the past been, and may continue to be, affected by a number of factors that are beyond our control, such as general macroeconomic conditions, conditions in the financial services markets, geopolitical conditions and other general political and economic developments, and can continue to be affected by such factors in the future.
We could face risks associated with, or arising out of, environmental, health and safety laws and regulations.
We could face risks associated with, or arising out of changing laws and regulations, including those involving environmental, health and safety laws and regulations.
D uring the three months ended June 30, 2019 , we entered into the CIA with the OIG imposing c ertain compliance obligations on us and our subsidiary, CRC Health , in connection with such settlement .
During the three months ended June 30, 2019, we entered into the CIA with the OIG imposing certain compliance obligations on us and our subsidiary, CRC Health, LLC, in connection with such settlement.
We maintain liability insurance intended to cover service user, third-party and employee personal injury claims. Due to the structure of our insurance program under which we carry a large self-insured retention, there may be substantial claims in respect of which the liability for damages and costs falls to us before being met by any insurance underwriter.
Due to the structure of our insurance program under which we carry a large self-insured retention, there may be substantial claims in respect of which the liability for damages and costs falls to us before being met by any insurance underwriter.
Because many of the patients we treat suffer from severe mental health and chemical dependency disorders, patient incidents, including deaths, sexual abuse, assaults and elopements, occur from time to time.
Because many of the patients we treat suffer from severe mental health and chemical dependency disorders, patient incidents, including deaths, sexual abuse, assaults and elopements, have occurred in the past and could continue to occur in the future.
If our competitors are better able to attract patients, recruit and retain physicians and other healthcare professionals, expand services or obtain favorable managed care contracts at their facilities, we may experience a decline in patient volume and our results of operations may be adversely affected. 26 Table of Contents We may be unable to extend leases at expiration, which could harm our business, financial condition or results of operations.
If our competitors are better able to attract patients, recruit and retain physicians and other healthcare professionals, expand services or obtain favorable managed care contracts at their facilities, we may experience a decline in patient volume and our results of operations may be adversely affected.
COVID-19 is continuing to evolve and its full impact remains unknown and difficult to predict; however, it has adversely affected our business operations in 2020, 2021 and 2022 and could negatively impact our financial performance for 2023 or longer.
COVID-19 is continuing to evolve and its full impact remains unknown and difficult to predict; however, it has adversely affected our business operations since 2020 and could negatively impact our financial performance in the future.
Some of our employees are represented by labor unions and any work stoppage could adversely affect our business. Increased labor union activity could adversely affect our labor costs. At December 31, 2022, labor unions represented approximately 350 of our employees at two of our facilities through four collective bargaining agreements. We cannot assure you that employee relations will remain stable.
Some of our employees are represented by labor unions and any work stoppage could adversely affect our business. Increased labor union activity could adversely affect our labor costs. At December 31, 2023, a labor union represented approximately 150 of our employees at one of our facilities. We cannot assure you that employee relations will remain stable.
The COVID-19 global pandemic continues to impact our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time or if patient volumes decline at our facilities.
Although the COVID-19 public health emergency expired in May 2023, our operations, business and financial condition, and our liquidity could be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time or if patient volumes decline at our facilities.
Consequently, we must either develop sites to create facilities or purchase or lease existing facilities, which may require substantial modification. We must be able to identify suitable sites and there is no guarantee that such sites will be available at all, or at an economically viable cost or in areas of sufficient demand for our services.
We must be able to identify suitable sites and there is no guarantee that such sites will be available at all, or at an economically viable cost or in areas of sufficient demand for our services.
If conditions in the global economy remain uncertain or weaken further, this could materially adversely impact our ADC, which would have a corresponding negative impact on our business, results of operations and financial condition. A worsening of the economic and employment conditions in the geographies in which we operate could materially affect our business and future results of operations.
If conditions in the global economy remain uncertain or weaken further, this could materially adversely impact our average daily census (“ADC”), which would have a corresponding negative impact on our business, results of operations and financial condition.
At December 31, 2022, we had approximately $1.4 billion of total debt (net of debt issuance costs, discounts and premiums of $12.6 million), which included approximately $473.4 million of debt under the New Credit Facility, $450.0 million of debt under the 5.500% Senior Notes and $475.0 million of debt under the 5.000% Senior Notes. See “Item 1.
At December 31, 2023, we had approximately $1.4 billion of total debt (net of debt issuance costs, discounts and premiums of $10.4 million), which included approximately $457.2 million of debt under the Credit Facility, $450.0 million of debt under the 5.500% Senior Notes (as defined below) and $475.0 million of debt under the 5.000% Senior Notes (as defined below).

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table lists, by state or country, the number of behavioral healthcare facilities directly or indirectly owned and operated by us at December 31, 2022: State Facilities Operated Beds Alaska 1 — Arizona 4 481 Arkansas 6 785 California 25 496 Delaware 3 130 Florida 12 481 Georgia 9 390 Illinois 2 252 Indiana 10 337 Iowa 2 — Kansas 1 — Kentucky 1 — Louisiana 6 467 Maine 5 — Maryland 3 — Massachusetts 14 263 Michigan 4 346 Mississippi 3 496 Missouri 6 580 Nevada 3 134 New Hampshire 2 — New Jersey 1 — New Mexico 1 46 North Carolina 10 503 Ohio 6 290 Oklahoma 4 108 Oregon 7 — Pennsylvania 29 1,729 Rhode Island 2 — South Carolina 1 63 South Dakota 1 126 Tennessee 14 985 Texas 5 567 Utah 6 147 Vermont 1 — Virginia 9 442 Washington 9 137 West Virginia 7 — Wisconsin 14 35 Puerto Rico 1 172 250 10,988 See “Item 1.
Biggest changeThe following table lists, by state or country, the number of behavioral healthcare facilities directly or indirectly owned and operated by us at December 31, 2023: State Facilities Operated Beds Alaska 1 — Arizona 4 533 Arkansas 6 785 California 22 486 Delaware 4 130 Florida 13 509 Georgia 9 390 Illinois 3 353 Indiana 10 337 Iowa 2 — Kansas 1 — Kentucky 1 — Louisiana 6 467 Maine 6 — Maryland 3 — Massachusetts 14 263 Michigan 5 442 Mississippi 3 496 Missouri 6 580 Nevada 3 134 New Hampshire 2 — New Jersey 1 — North Carolina 10 376 Ohio 6 290 Oklahoma 4 108 Oregon 7 — Pennsylvania 31 1,836 Rhode Island 2 — South Carolina 1 63 South Dakota 1 126 Tennessee 14 1,049 Texas 5 607 Utah 6 147 Vermont 1 — Virginia 9 474 Washington 8 — West Virginia 7 — Wisconsin 15 35 Puerto Rico 1 172 253 11,188 See “Item 1.
Business— U.S. Operations” for a summary description of the facilities that we own and lease. In addition, we currently lease approximately 61,000 square feet of office space at 6100 Tower Circle, Franklin, Tennessee, for our corporate headquarters. Our headquarters and facilities are generally well maintained and in good operating condition. 34 Table of Contents
Business — Operations” for a summary description of the facilities that we own and lease. In addition, we currently lease approximately 61,000 square feet of office space at 6100 Tower Circle, Franklin, Tennessee, for our corporate headquarters. Our headquarters and facilities are generally well maintained and in good operating condition.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found in Note 20—Commitments and Contingencies in the accompanying notes to our consolidated financial statements beginning on Page F-1 of this Annual Report on Form 10-K, which information is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 35 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings. Information with respect to this item may be found in Note 11 — Commitments and Contingencies in the accompanying notes to our consolidated financial statements beginning on Page F-1 of this Annual Report on Form 10-K, which information is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 33 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities During the three months ended December 31, 2022, the Company withheld shares of Company common stock to satisfy employee minimum statutory tax withholding obligations payable upon the vesting of restricted stock, as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 – October 31 2,502 $ 82.34 — — November 1 – November 30 1,151 $ 79.40 — — December 1 – December 31 — — — — Total 3,653 Dividends We have never declared or paid dividends on our common stock.
Biggest changeIssuer Purchases of Equity Securities During the three months ended December 31, 2023, the Company withheld shares of Company common stock to satisfy employee minimum statutory tax withholding obligations payable upon the vesting of restricted stock units, as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 1 – October 31 3,709 $ 74.54 — — November 1 – November 30 2,306 $ 73.18 — — December 1 – December 31 730 $ 74.96 — — Total 6,745 Dividends We have never declared or paid dividends on our common stock.
Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with covenants in current and future agreements governing our indebtedness (including our New Credit Facility and the indenture governing our Senior Notes), and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant.
Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with covenants in current and future agreements governing our indebtedness (including the Credit Facility and the indenture governing the Senior Notes), and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is listed for trading on The NASDAQ Global Select Market under the symbol “ACHC.” Stockholders As of February 28, 2023, there were approximately 541 holders of record of our common stock. Recent Sales of Unregistered Securities None.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matter s and Issuer Purchases of Equity Securities. Our common stock is listed for trading on The NASDAQ Global Select Market under the symbol “ACHC.” Stockholders As of February 28, 2024, there were approximately 598 holders of record of our common stock. Recent Sales of Unregistered Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands): Year Ended December 31, 2022 2021 2020 Amount % Amount % Amount % Revenue 2,610,399 100.0 % 2,314,394 100.0 % 2,089,929 100.0 % Salaries, wages and benefits 1,393,434 53.4 % 1,243,804 53.7 % 1,154,522 55.2 % Professional fees 158,013 6.1 % 136,739 5.9 % 120,489 5.8 % Supplies 100,200 3.8 % 90,702 3.9 % 87,241 4.2 % Rents and leases 45,462 1.7 % 38,519 1.7 % 37,362 1.8 % Other operating expenses 349,277 13.4 % 301,339 13.0 % 262,272 12.5 % Income from provider relief fund (21,451 ) (0.8 )% (17,900 ) (0.8 )% (32,819 ) (1.6 )% Depreciation and amortization 117,769 4.5 % 106,717 4.6 % 95,256 4.6 % Interest expense, net 69,760 2.7 % 76,993 3.3 % 158,105 7.6 % Debt extinguishment costs — 0.0 % 24,650 1.1 % 7,233 0.3 % Loss on impairment — 0.0 % 24,293 1.0 % 4,751 0.2 % Transaction-related expenses 23,792 0.9 % 12,778 0.6 % 11,720 0.6 % 2,236,256 85.7 % 2,038,634 88.0 % 1,906,132 91.2 % Income from continuing operations before income taxes 374,143 14.3 % 275,760 12.0 % 183,797 8.8 % Provision for income taxes 94,110 3.6 % 67,557 2.9 % 40,606 1.9 % Income from continuing operations 280,033 10.7 % 208,203 8.9 % 143,191 6.8 % Loss from discontinued operations, net of taxes — 0.0 % (12,641 ) (0.5 )% (812,390 ) (38.9 )% Net income (loss) 280,033 10.7 % 195,562 8.4 % (669,199 ) (32.0 )% Net income attributable to noncontrolling interests (6,894 ) (0.3 )% (4,927 ) (0.2 )% (2,933 ) (0.1 )% Net income (loss) attributable to Acadia Healthcare Company, Inc. 273,139 10.4 % 190,635 8.2 % (672,132 ) (32.2 )% We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services.
Biggest changeResults of Operations The following table illustrates our consolidated results of operations for the respective periods shown (dollars in thousands): Year Ended December 31, 2023 2022 2021 Amount % Amount % Amount % Revenue $ 2,928,738 100.0 % $ 2,610,399 100.0 % $ 2,314,394 100.0 % Salaries, wages and benefits 1,572,330 53.7 % 1,393,434 53.4 % 1,243,804 53.7 % Professional fees 176,013 6.0 % 158,013 6.1 % 136,739 5.9 % Supplies 105,992 3.6 % 100,200 3.8 % 90,702 3.9 % Rents and leases 46,552 1.6 % 45,462 1.7 % 38,519 1.7 % Other operating expenses 388,906 13.3 % 349,277 13.4 % 301,339 13.0 % Income from provider relief fund (6,419 ) (0.2 )% (21,451 ) (0.8 )% (17,900 ) (0.8 )% Depreciation and amortization 132,349 4.5 % 117,769 4.5 % 106,717 4.6 % Interest expense, net 82,125 2.8 % 69,760 2.7 % 76,993 3.3 % Debt extinguishment costs — 0.0 % — 0.0 % 24,650 1.1 % Legal settlements expense 394,181 13.5 % — 0.0 % — 0.0 % Loss on impairment 9,790 0.3 % — 0.0 % 24,293 1.0 % Gain on sale of property (9,747 ) (0.3 )% — 0.0 % — 0.0 % Transaction, legal and other costs 62,026 2.1 % 23,792 0.9 % 12,778 0.6 % Total expenses 2,954,098 100.9 % 2,236,256 85.7 % 2,038,634 88.0 % (Loss) income from continuing operations before income taxes (25,360 ) (0.9 )% 374,143 14.3 % 275,760 12.0 % (Benefit from) provision for income taxes (9,699 ) (0.3 )% 94,110 3.6 % 67,557 2.9 % (Loss) income from continuing operations (15,661 ) (0.6 )% 280,033 10.7 % 208,203 8.9 % Loss from discontinued operations, net of taxes — 0.0 % — 0.0 % (12,641 ) (0.5 )% Net (loss) income (15,661 ) (0.6 )% 280,033 10.7 % 195,562 8.4 % Net income attributable to noncontrolling interests (6,006 ) (0.2 )% (6,894 ) (0.3 )% (4,927 ) (0.2 )% Net (loss) income attributable to Acadia Healthcare Company, Inc. $ (21,667 ) (0.8 )% $ 273,139 10.4 % $ 190,635 8.2 % 37 We believe that we are well positioned to help meet the growing demand for behavioral healthcare services and recorded revenue growth of 12% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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 (iv) individual patients and clients.
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.
Transaction-related expenses represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective periods, as summarized below (in thousands): Year Ended December 31, 2022 2021 Management transition costs $ 11,575 $ — Termination and restructuring costs 6,476 5,343 Legal, accounting and other acquisition-related costs 5,741 7,435 $ 23,792 $ 12,778 Discontinued Operations.
Transaction, legal and other costs represent legal, accounting, termination, restructuring, management transition, acquisition and other similar costs incurred in the respective periods, as summarized below (in thousands): Year Ended December 31, 2022 2021 Management transition costs $ 11,575 $ - Termination and restructuring costs 6,476 5,343 Legal, accounting and other acquisition-related costs 5,741 7,435 $ 23,792 $ 12,778 Discontinued Operations.
Consistent with the same facility patient day growth in 2021, the growth in same facility patient days for the year ended December 31, 2022 compared to the year ended December 31, 2021 resulted from the addition of beds to our existing facilities and ongoing demand for our services. Salaries, wages and benefits.
Consistent with the same 39 facility patient day growth in 2021, the growth in same facility patient days for the year ended December 31, 2022 compared to the year ended December 31, 2021 resulted from the addition of beds to our existing facilities and ongoing demand for our services. Salaries, wages and benefits.
Loss from discontinued operations for the year ended December 31, 2021 was $12.6 million. Provision for income taxes. For the year ended December 31, 2022, the provision for income taxes was $94.1 million, reflecting an effective tax rate of 25.2%, compared to $67.6 million, reflecting an effective tax rate of 24.5%, for the year ended December 31, 2021.
Loss from discontinued operations for the year ended December 31, 2021 was $12.6 million. 40 Provision for income taxes. For the year ended December 31, 2022, the provision for income taxes was $94.1 million, reflecting an effective tax rate of 25.2%, compared to $67.6 million, reflecting an effective tax rate of 24.5%, for the year ended December 31, 2021.
Cash used in continuing financing activities for the year ended December 31, 2022 primarily consisted of principal payments on revolving credit facility of $95.0 million, principal payments on long-term debt of $18.6 million, repurchase of shares for payroll tax witholdings, net of proceeds from stock option exercises of $6.2 million, acquisition of ownership interests from noncontrolling partners of $5.5 million and distributions to noncontrolling partners in joint ventures of $1.0 million, offset by contributions from noncontrolling partners in joint ventures of $15.4 million and other of $0.1 million.
Cash used in continuing financing activities for the year ended December 31, 2022 primarily consisted of principal payments on revolving credit facility of $95.0 million, principal payments on long-term debt of $18.6 million, repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises of $6.2 million, acquisition of ownership interests from noncontrolling partners of $5.5 million and distributions to noncontrolling partners in joint ventures of $1.0 million, offset by contributions from noncontrolling partners in joint ventures of $15.4 million and other of $0.1 million.
As a part of the closing of the New Credit Facility on March 17, 2021, we (i) refinanced and terminated the Prior Credit Facility and (ii) financed the redemption of all of the outstanding 5.625% Senior Notes.
As a part of the closing of the Credit Facility on March 17, 2021, we (i) refinanced and terminated the Prior Credit Facility and (ii) financed the redemption of all of the outstanding 5.625% Senior Notes.
Revenue increased $296.0 million, or 12.8%, to $2,610.4 million for the year ended December 31, 2022 from $2,314.4 million for the year ended December 31, 2021.
Year Ended December 31, 2022 compared to the Year Ended December 31, 2021 Revenue. Revenue increased $296.0 million, or 12.8%, to $2,610.4 million for the year ended December 31, 2022 from $2,314.4 million for the year ended December 31, 2021.
Management expects to take advantage of several strategies that are more accessible as a result of 38 Table of Contents 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 in the U.S. through acquisitions, wholly-owned de novo facilities, joint ventures and bed additions in existing facilities.
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 in the U.S. through acquisitions, wholly-owned de novo facilities, joint ventures and bed additions in existing facilities.
We have the ability to increase the amount of the Senior Facilities, which may take the form of increases to the Revolving Facility or the Term Loan Facility or the issuance of one or more incremental term loan facilities (collectively, the “Incremental Facilities”), upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities.
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 term loan facilities (collectively, the “Incremental Facilities”), upon obtaining additional commitments from new or existing lenders and the satisfaction of customary conditions precedent for such Incremental Facilities.
On January 19, 2021, we completed the U.K. Sale pursuant to a Share Purchase Agreement in which we sold all of the securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a subsidiary of the Company, which constituted the entirety of our U.K. operations. The U.K.
On January 19, 2021, we completed the U.K. Sale pursuant to a Share Purchase Agreement in which we sold all of the securities of AHC-WW Jersey Limited, a private limited liability company incorporated in Jersey and a subsidiary of the Company, which constituted the entirety of our U.K. operations. As a result of the U.K.
We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. We established accruals for taxes and associated interest that may become payable in future years as a result of audits by tax authorities.
We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. We have accruals for taxes and associated interest that may become payable in future years as a result of audits by tax authorities.
These amounts are reviewed as circumstances warrant and adjusted as events occur that affect our 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. 50 Table of Contents
These amounts are reviewed as circumstances warrant and adjusted as events occur that affect our 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.
Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management. 47 Table of Contents 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.
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.
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 the 5.000% 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. 42 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 projected interest payments reflect interest rates in place on our variable-rate debt at December 31, 2022. (b) Amounts exclude variable components of lease payments. Off-Balance Sheet Arrangements At December 31, 2022, we had standby letters of credit outstanding of $3.4 million related to security for the payment of claims as required by our workers’ compensation insurance program.
The projected interest payments reflect interest rates in place on our variable-rate debt at December 31, 2023. (b) Amounts exclude variable components of lease payments. Off-Balance Sheet Arrangements At December 31, 2023, we had standby letters of credit outstanding of $3.5 million related to security for the payment of claims as required by our workers’ compensation insurance program.
As of our annual impairment tests on October 1, 2022 and October 1, 2021, we had one reporting unit, behavioral health services. The fair value of our behavioral health services reporting unit substantially exceeded its carrying value, and therefore no impairment was recorded.
As of our annual impairment tests on October 1, 2023, October 1, 2022 and October 1, 2021, we had one reporting unit, behavioral healthcare services. The fair value of our behavioral healthcare services reporting unit substantially exceeded its carrying value, and therefore no impairment was recorded.
Same facility supplies expense was $94.7 million for the year ended December 31, 2022, or 3.8% of revenue, compared to $89.8 million for the year ended December 31, 2021, or 3.9% of revenue. 40 Table of Contents Rents and leases.
Same facility supplies expense was $94.7 million for the year ended December 31, 2022, or 3.8% of revenue, compared to $89.8 million for the year ended December 31, 2021, or 3.9% of revenue. Rents and leases.
Depreciation expense was $117.8 million, $106.7 million and $95.3 million for the years ended December 31, 2022, 2021 and 2020, 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.
Depreciation expense was $132.3 million, $117.8 million and $106.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. 46 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.
Senior Notes 5.500% Senior Notes due 2028 On June 24, 2020, we issued $450.0 million of the 5.500% Senior Notes due 2028.
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”).
On September 21, 2015, we issued $275.0 million of additional 5.625% Senior Notes. The additional notes formed a single class of debt securities with the 5.625% Senior Notes issued in February 2015. Giving effect to this issuance, we had outstanding an aggregate of $650.0 million of the 5.625% Senior Notes.
The additional notes formed a single class of debt securities with the 5.625% Senior Notes issued in February 2015. Giving effect to this issuance, we had outstanding an aggregate of $650.0 million of the 5.625% Senior Notes.
These risks, uncertainties and other factors include, but are not limited to, the following: • the impact of competition for staffing, labor shortages and higher turnover rates on our labor costs and profitability; • the impact of increases in inflation and rising interest rates; • 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; • the impact of general economic and employment conditions, including increased construction and other costs due to inflation, on our business and future results of operations; • 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 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 impact of governmental investigations, regulatory actions and whistleblower lawsuits; • any failure to comply with the terms of the Company’s corporate integrity agreement with the OIG; • the impact of healthcare reform in the U.S.; • 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 impact of disruptions on our inpatient and outpatient volumes caused by pandemics, epidemics or outbreaks of infectious diseases, such as the COVID-19 pandemic; 37 Table of Contents • our dependence on key management personnel, key executives and local facility management personnel; • 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 cyber-security incident and any resulting adverse impact on our operations or violation of laws and regulations regarding information privacy; • 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 recent tax legislation, including provisions of the CARES Act and additional guidance 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; and • those risks and uncertainties described from time to time in our filings with the SEC.
These risks, uncertainties and other factors include, but are not limited to, the following: • the impact of competition for staffing, labor shortages and higher turnover rates on our labor costs and profitability; • the impact of increases in inflation and rising interest rates; • 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; • the impact of general economic and employment conditions, including increased construction and other costs due to inflation, on our business and future results of operations; • 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 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 governmental investigations, regulatory actions and whistleblower lawsuits; • any failure to comply with the terms of our corporate integrity agreement with the OIG; • the impact of healthcare reform in the U.S.; • 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; 35 • the impact of Medicaid eligibility determinations associated with the end of COVID-19 related Medicaid continuing coverage requirements; • the impact of disruptions on our inpatient and outpatient volumes caused by pandemics, epidemics or outbreaks of infectious diseases, such as the COVID-19 pandemic; • our dependence on key management personnel, key executives and local facility management personnel, and the impact of any disruptions from the recent transition of various executives; • 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 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 recent tax legislation, including provisions of the CARES Act and additional guidance 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; and • those risks and uncertainties described from time to time in our filings with the SEC.
Additionally, during the third quarter of 2021, we recorded a $1.1 million non-cash property impairment charge for one facility in Louisiana resulting from hurricane damage. Transaction-related expenses. Transaction-related expenses were $23.8 million for the year ended December 31, 2022 compared to $12.8 million for the year ended December 31, 2021.
Additionally, during the third quarter of 2021, we recorded a $1.1 million non-cash property impairment charge for one facility in Louisiana resulting from hurricane damage. Transaction, legal and other costs. Transaction, legal and other costs were $23.8 million for the year ended December 31, 2022 compared to $12.8 million for the year ended December 31, 2021.
Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.
Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue.
Same facility rents and leases were $34.5 million for the year ended December 31, 2021, or 1.5% of revenue, compared to $34.1 million for the year ended December 31, 2020, or 1.6% of revenue. Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses.
Same facility rents and leases were $42.5 million for the year ended December 31, 2023, or 1.5% of revenue, compared to $42.1 million for the year ended December 31, 2022, or 1.6% of revenue. Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses.
We believe that the positions taken on previously filed tax returns are reasonable and have not established tax and interest reserves in recognition that various taxing authorities may challenge the positions taken by us resulting in additional liabilities for taxes and interest.
Although management believes that the positions taken on previously filed tax returns are reasonable, we nevertheless have established tax and interest reserves in recognition that various taxing authorities may challenge the positions taken by us resulting in additional liabilities for taxes and interest.
Consistent with the same facility patient day growth in 2020, the growth in same 41 Table of Contents facility patient days for the year ended December 31, 2021 compared to the year ended December 31, 2020 resulted from the addition of beds to our existing facilities and ongoing demand for our services. Salaries, wages and benefits.
Consistent with the same facility patient day growth in 2022, the growth in same facility patient days for the year ended December 31, 2023 compared to the year ended December 31, 2022 resulted from the addition of beds to our existing facilities and ongoing demand for our services. Salaries, wages and benefits.
(b) Average length of stay is defined as patient days divided by admissions. (c) Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, loss on impairment, transaction-related expenses, interest expense and depreciation and amortization.
(b) Average length of stay is defined as patient days divided by admissions. (c) Adjusted EBITDA is defined as income before provision for income taxes, equity-based compensation expense, debt extinguishment costs, loss on impairment, gain on sale of property, transaction, legal and other costs, interest expense, legal settlements expense and depreciation and amortization.
(d) For the years ended December 31, 2022, 2021 and 2020, excludes income from provider relief fund of $21.5 million, $17.9 million and $32.8 million, respectively. Year Ended December 31, 2022 compared to the Year Ended December 31, 2021 Revenue.
(d) For the years ended December 31, 2023, 2022 and 2021, excludes income from provider relief fund of $6.4 million, $21.5 million and $17.9 million, respectively. Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 Revenue.
We had total available cash and cash equivalents of $97.6 million, $133.8 million and $378.7 million at December 31, 2022, 2021 and 2020, respectively, of which approximately $3.7 million, $20.1 million and $17.0 million was held by our foreign subsidiaries, respectively.
We had total available cash and cash equivalents of $100.1 million, $97.6 million and $133.8 million at December 31, 2023, 2022 and 2021, respectively, of which approximately $11.3 million, $3.7 million and $20.1 million, respectively, was held by our foreign subsidiaries.
Cash paid for capital expenditures for the year ended December 31, 2022 was $296.1 million, consisting of routine or maintenance capital expenditures of $60.5 million and expansion capital expenditures of $235.6 million. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue.
Cash paid for capital expenditures for the year ended December 31, 2023 was $424.1 million, consisting of routine or maintenance capital expenditures of $99.6 million and expansion capital expenditures of $324.5 million. We define expansion capital expenditures as those that increase the capacity of our facilities or otherwise enhance revenue.
The workers’ compensation liability was $24.2 million at December 31, 2022, of which $12.0 million was included in accrued salaries and benefits and $12.2 million was included in other long-term liabilities, and such liability was $23.6 million at December 31, 2021, of which $12.0 million was included in accrued salaries and benefits and $11.6 million was included in other long-term liabilities.
The workers’ compensation liability was $26.8 million at December 31, 2023, of which $12.0 million was included in accrued salaries and benefits and $14.8 million was included in other long-term liabilities, and such liability was $24.2 million at December 31, 2022, of which $12.0 million was included in accrued salaries and benefits and $12.2 million was included in other long-term liabilities.
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. 5.625% Senior Notes due 2023 On February 11, 2015, we issued $375.0 million of the 5.625% Senior Notes.
We may redeem the Senior Notes at our option, in whole or part, at the dates and amounts set forth in the indentures. 5.625% Senior Notes due 2023 On February 11, 2015, we issued $375.0 million of the 5.625% Senior Notes. On September 21, 2015, we issued $275.0 million of additional 5.625% Senior Notes.
Same facility rents and leases were $ 37.0 million for the year ended December 31, 2022 , or 1. 5 % of revenue, compared to $ 35.0 million for the year ended December 31, 2021 , or 1. 5 % of revenue. Other operating expenses.
Same facility rents and leases were $37.0 million for the year ended December 31, 2022, or 1.5% of revenue, compared to $35.0 million for the year ended December 31, 2021, or 1.5% of revenue. Other operating expenses. Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses.
The following table presents revenue by payor type and as a percentage of revenue for continuing operations for the years ended December 31, 2022, 2021 and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Amount % Amount % Amount % Commercial $ 788,895 30.2 % $ 684,292 29.6 % $ 596,698 28.5 % Medicare 394,227 15.1 % 364,598 15.8 % 330,070 15.8 % Medicaid 1,319,600 50.6 % 1,147,884 49.6 % 1,037,852 49.7 % Self-Pay 76,050 2.9 % 93,425 4.0 % 98,302 4.7 % Other 31,627 1.2 % 24,195 1.0 % 27,007 1.3 % Revenue $ 2,610,399 100.0 % $ 2,314,394 100.0 % $ 2,089,929 100.0 % The following tables present a summary of our aging of accounts receivable at December 31, 2022 and 2021: December 31, 2022 Current 30-90 90-150 >150 Total Commercial 18.0 % 5.3 % 2.8 % 8.4 % 34.5 % Medicare 11.5 % 1.7 % 0.7 % 1.4 % 15.3 % Medicaid 31.7 % 4.5 % 2.6 % 4.7 % 43.5 % Self-Pay 1.2 % 1.4 % 1.2 % 2.6 % 6.4 % Other 0.2 % 0.0 % 0.0 % 0.1 % 0.3 % Total 62.6 % 12.9 % 7.3 % 17.2 % 100.0 % December 31, 2021 Current 30-90 90-150 >150 Total Commercial 20.1 % 6.2 % 2.6 % 8.2 % 37.1 % Medicare 11.3 % 1.7 % 0.5 % 2.0 % 15.5 % Medicaid 28.6 % 3.5 % 2.0 % 5.6 % 39.7 % Self-Pay 1.3 % 1.4 % 1.4 % 3.0 % 7.1 % Other 0.1 % 0.1 % 0.2 % 0.2 % 0.6 % Total 61.4 % 12.9 % 6.7 % 19.0 % 100.0 % Insurance We are subject to medical malpractice and other lawsuits due to the nature of the services we provide.
The following table presents revenue by payor type and as a percentage of revenue for continuing operations for the years ended December 31, 2023, 2022 and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 Amount % Amount % Amount % Commercial $ 820,701 28.0 % $ 788,895 30.2 % $ 684,292 29.6 % Medicare 441,761 15.1 % 394,227 15.1 % 364,598 15.8 % Medicaid 1,578,518 53.9 % 1,319,600 50.6 % 1,147,884 49.6 % Self-Pay 67,583 2.3 % 76,050 2.9 % 93,425 4.0 % Other 20,175 0.7 % 31,627 1.2 % 24,195 1.0 % Revenue $ 2,928,738 100.0 % $ 2,610,399 100.0 % $ 2,314,394 100.0 % 45 The following tables present a summary of our aging of accounts receivable at December 31, 2023 and 2022: December 31, 2023 Current 30-90 90-150 >150 Total Commercial 17.3 % 5.4 % 3.1 % 9.5 % 35.3 % Medicare 9.3 % 1.4 % 0.5 % 1.1 % 12.3 % Medicaid 33.4 % 5.4 % 2.5 % 4.7 % 46.0 % Self-Pay 1.4 % 1.3 % 1.2 % 2.5 % 6.4 % Other 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Total 61.4 % 13.5 % 7.3 % 17.8 % 100.0 % December 31, 2022 Current 30-90 90-150 >150 Total Commercial 18.0 % 5.3 % 2.8 % 8.4 % 34.5 % Medicare 11.5 % 1.7 % 0.7 % 1.4 % 15.3 % Medicaid 31.7 % 4.5 % 2.6 % 4.7 % 43.5 % Self-Pay 1.2 % 1.4 % 1.2 % 2.6 % 6.4 % Other 0.2 % 0.0 % 0.0 % 0.1 % 0.3 % Total 62.6 % 12.9 % 7.3 % 17.2 % 100.0 % Insurance We are subject to medical malpractice and other lawsuits due to the nature of the services we provide.
The indentures governing 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. 45 Table of Contents The Senior Notes issued by us are guaranteed by each of our subsidiaries that guaranteed our obligations under the New Credit Facility.
The indentures governing the 5.500% Senior Notes and the 5.000% 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.
Other operating expenses were $301.3 million for the year ended December 31, 2021, or 13.0% of revenue, compared to $262.3 million for the year ended December 31, 2020, or 12.5% of revenue.
Other operating expenses were $349.3 million for the year ended December 31, 2022, or 13.4% of revenue, compared to $301.3 million for the year ended December 31, 2021, or 13.0% of revenue.
The New Credit Facility 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 Senior Facilities may be accelerated and/or the lenders’ commitments terminated. At December 31, 2022, the Company was in compliance with such covenants.
The Credit Facility 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 Facility may be accelerated, the lenders’ commitments terminated, and/or the lenders may exercise collateral remedies. At December 31, 2023, we were in compliance with all financial covenants.
In addition, the New Credit Facility contains financial covenants requiring the Company on a consolidated basis to maintain, as of the last day of any consecutive four fiscal quarter period, a consolidated total net leverage ratio of not more than 5.0 to 1.0 and an interest coverage ratio of at least 3.0 to 1.0.
In addition, the Credit Facility contains financial covenants requiring us on a consolidated basis to maintain, as of the last day of any consecutive four fiscal quarter period, a consolidated total net leverage ratio of not more than 4.5 to 1.0 (which may be increased to 5.0 to 1.0 for a period of up to four consecutive fiscal quarters following the consummation of certain material acquisitions) and an interest coverage ratio of at least 3.0 to 1.0.
Additionally, during the third quarter of 2021, we recorded a $1.1 million non-cash property impairment charge for one facility in Louisiana resulting from hurricane damage.
During the second quarter of 2021, we opened a 260-bed replacement facility in Pennsylvania and recorded a non-cash property impairment charge of $23.2 million for the existing facility. Additionally, during the third quarter of 2021, we recorded a $1.1 million non-cash property impairment charge for one facility in Louisiana resulting from hurricane damage.
Same facility revenue increased by $225.6 million, or 10.9%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, resulting from same facility growth in patient days of 4.3% and an increase in same facility revenue per day of 6.3%.
Same facility revenue increased by $309.3 million, or 12.0%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, resulting from same facility growth in patient days of 5.1%, an increase in same facility revenue per patient day of 6.5% and an increase in same facility admissions of 4.9%.
We recorded an unfavorable adjustment of $5.9 million to our estimated liability for self-insured professional and general liability claims during the year ended December 31, 2022 , relating to the settlement or expected settlement of certain prior year claims relating primarily to the 2017 to 201 8 period.
We recorded unfavorable adjustments of $5.3 million and $5.9 million to our estimated liability for self-insured professional and general liability claims during the years ended December 31, 2023 and 2022, respectively, relating to the settlement or expected settlement of certain prior year claims.
The net adjustments to estimated cost report settlements resulted in an increase to revenue of $ 0.1 million for the year ended December 31, 2022 , compare d to decreases to revenue of $ 5.4 million and $ 1.3 million for the years ended December 31, 2021 and 2020 , respectively .
The net adjustments to estimated cost report settlements resulted in an increase to revenue of $1.8 million and $0.1 million for the years ended December 31, 2023 and 2022, compared to a decrease to revenue of $5.4 million for the year ended December 31, 2021.
Market Risk Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at December 31, 2022 was composed of $914.3 million of fixed-rate debt and $450.2 million of variable-rate debt with interest based on LIBOR plus an applicable margin.
Market Risk Our interest expense is sensitive to changes in market interest rates. Our long-term debt outstanding at December 31, 2023 was composed of $915.9 million of fixed-rate debt and $426.7 million of variable-rate debt with interest based on Adjusted Term SOFR plus an applicable margin.
In connection with the redemption of the 5.625% Senior Notes, we recorded debt extinguishment costs of $3.3 million, including the write-off of deferred financing and premiums costs in the consolidated statement of operations. 6.125% Senior Notes due 2021 On March 12, 2013, we issued $150.0 million of the 6.125% Senior Notes.
On March 17, 2021, we satisfied and discharged the indentures governing the 5.625% Senior Notes. In connection with the redemption of the 5.625% Senior Notes, we recorded debt extinguishment costs of $3.3 million, including the write-off of deferred financing and premiums costs in the consolidated statement of operations.
Cash paid for capital expenditures for the year ended December 31, 2021 was $244.8 million, consisting of routine or maintenance capital expenditures of $41.8 million and expansion capital expenditures of $203.0 million. Cash used in continuing financing activities for the year ended December 31, 2022 was $110.9 million compared to $1,636.5 million for the year ended December 31, 2021.
Cash paid for capital expenditures for the year ended December 31, 2022 was $296.1 million, consisting of routine or maintenance capital expenditures of $60.5 million and expansion capital expenditures of $235.6 million. Cash used in continuing financing activities for the year ended December 31, 2023 was $62.7 million compared to $110.9 million for the year ended December 31, 2022.
At December 31, 2022, we operated 250 behavioral healthcare facilities with approximately 11,000 beds in 39 states and Puerto Rico. During the year ended December 31, 2022, we added 560 beds, consisting of 290 added to existing facilities and 270 added through the opening of one wholly-owned facility and two joint venture facilities, and we opened seven CTCs.
At December 31, 2023, we operated 253 behavioral healthcare facilities with approximately 11,200 beds in 38 states and Puerto Rico. During the year ended December 31, 2023, we added 595 beds, consisting of 302 added to existing facilities 36 and 293 added through the opening of one wholly-owned facility and two joint venture facilities, and we opened six CTCs.
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 through August 31, 2022 and $5.0 million and $10.0 million for certain other claims thereafter. We have obtained reinsurance coverage from a third party to cover claims in excess of those limits.
A portion of our professional liability risks are insured through a wholly-owned insurance subsidiary providing coverage for up to $5.0 million per claim and $10.0 million for certain other claims through August 31, 2023 and $7.0 million and $10.0 million for certain other claims thereafter.
Same Facility Results (a) Revenue growth 9.2% 10.9% Patient days growth 2.5% 4.3% Admissions growth (1.0)% 3.5% Average length of stay change (b) 3.6% 0.8% Revenue per patient day growth 6.5% 6.3% Adjusted EBITDA margin change (c) 70 bps 150 bps Adjusted EBITDA margin excluding income from provider relief fund (d) 60 bps 220 bps (a) Results for the periods presented include facilities we have operated more than one year and exclude certain closed services.
The following table sets forth percent changes in same facility operating data for our continuing operations for the years ended December 31, 2023 and 2022 compared to the previous years: Year Ended December 31, 2023 2022 Same Facility Results (a) Revenue growth 12.0% 9.2% Patient days growth 5.1% 2.5% Admissions growth 4.9% (1.0)% Average length of stay change (b) 0.2% 3.6% Revenue per patient day growth 6.5% 6.5% Adjusted EBITDA margin change (c) 60 bps 70 bps Adjusted EBITDA margin excluding income from provider relief fund (d) 120 bps 60 bps (a) Results for the periods presented include facilities we have operated more than one year and exclude certain closed services.
Cash 43 Table of Contents used in continuing financing activities for the year ended December 31, 2021 primarily consisted of repayment of long-term debt of $ 2,227.9 million, principal payments on revolving credit facility of $ 330.0 million, principal payments on long-term debt of $ 8.0 million, payment of debt issuance costs of $ 8.0 million, other of $ 6.9 million and distributions to noncontrolling partners in joint ventures of $ 1.6 million , offset by borrowing on long-term debt of $ 425.0 million, borrowings on revolving credit facility of $ 500.0 million , repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises of $ 16.3 million and contributions from noncontrolling partners in joint ventures of $ 4.5 million.
Cash used in continuing financing activities for the year ended December 31, 2023 primarily consisted of repurchase of shares for payroll tax withholdings, net of proceeds from stock option exercises of $44.3 million, principal payments on revolving credit facility of $35.0 million, principal payments on long-term debt of $21.3 million and distributions to noncontrolling partners in joint ventures of $5.1 million, offset by borrowing on revolving credit facility of $40.0 million and contributions from noncontrolling partners in joint ventures of $3.0 million.
Same facility professional fees were $123.3 million for the year ended December 31, 2021, or 5.4% of revenue, compared to $108.0 million, for the year ended December 31, 2020, or 5.2% of revenue. Supplies.
Same facility professional fees were $156.0 million for the year ended December 31, 2023, or 5.4% of revenue, compared to $145.2 million, for the year ended December 31, 2022, or 5.6% of revenue. 38 Supplies.
The professional and general liability reserve was $ 87.8 million a t December 31, 2021 , of which $ 11.9 million was included in other accrued liabilities and $ 75.9 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.
The professional and general liability reserve was $103.6 million at December 31, 2022, of which $12.1 million was included in other accrued liabilities and $91.5 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.
Excluding equity-based compensation expense, SWB expense was $1,206.3 million, or 52.1% of revenue, for the year ended December 31, 2021, compared to $1,132.0 million, or 54.2% of revenue, for the year ended December 31, 2020.
Excluding equity-based compensation expense, SWB expense was $1,540.0 million, or 52.6% of revenue, for the year ended December 31, 2023, compared to $1,363.8 million, or 52.2% of revenue, for the year ended December 31, 2022.
Liquidity and Capital Resources Cash provided by continuing operating activities for the year ended December 31, 2022 was $380.6 million compared to $374.2 million for the year ended December 31, 2021.
Liquidity and Capital Resources Cash provided by continuing operating activities for the year ended December 31, 2023 was $462.3 million compared to $380.6 million for the year ended December 31, 2022. Days sales outstanding at December 31, 2023 was 45 compared to 44 at December 31, 2022.
Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of our obligations under the New Credit Facility.
Subject to certain exceptions, substantially all of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries are required to guarantee the repayment of our obligations under the Credit Facility. We and such guarantor subsidiaries have granted a security interest in substantially all personal property assets as collateral for the obligations under the Credit Facility.
Such receivable was $ 37.8 million a t December 31, 2022 , of which $ 10.2 million was included in other current assets and $ 27.6 million was included in other assets, and such receivable was $ 37.9 million a t December 31, 2021 , of which $ 10.8 million was included in other current assets and $ 27.1 million was included in other assets.
Such receivable was $62.3 million at December 31, 2023, of which $33.6 million was included in other current assets and $28.7 million was included in other assets, and such receivable was $37.8 million at December 31, 2022, of which $10.2 million was included in other current assets and $27.6 million was included in other assets.
Rents and leases were $38.5 million for the year ended December 31, 2021, or 1.7% of revenue, compared to $37.4 million for the year ended December 31, 2020, or 1.8% of revenue.
Rents and leases were $46.6 million for the year ended December 31, 2023, or 1.6% of revenue, compared to $45.5 million for the year ended December 31, 2022, or 1.7% of revenue.
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 acquire and develop behavioral healthcare facilities and improve our operating results within our facilities and our other behavioral healthcare operations.
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 had $521.6 million of availability under the Revolving Facility and had standby letters of credit outstanding of $3.4 million related to security for the payment of claims required by our workers’ compensation insurance program at December 31, 2022. During the third quarter of 2021, we repaid $60.0 million of the initial $160.0 million balance outstanding on the Revolving Facility.
We had $516.5 million of availability under the Revolving Facility and had standby letters of credit outstanding of $3.5 million related to security for the payment of claims required by our workers’ compensation insurance program at December 31, 2023.
The professional and general liability reserve was $ 103.6 million a t December 31, 2022 , of which $ 12.1 million was included in other accrued liabilities and $ 91.5 million was included in other long-term liabilities.
The professional and general liability reserve was $109.4 million at December 31, 2023, of which $12.5 million was included in other accrued liabilities and $96.9 million was included in other long-term liabilities.
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.
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.
Same facility supplies expense was $89.7 million for the year ended December 31, 2021, or 3.9% of revenue, compared to $86.6 million for the year ended December 31, 2020, or 4.2% of revenue. Rents and leases.
Same facility supplies expense was $104.0 million for the year ended December 31, 2023, or 3.6% of revenue, compared to $99.0 million for the year ended December 31, 2022, or 3.8% of revenue. Rents and leases.
The acquisition was funded through a combination of cash on hand and a $70.0 million draw on the Revolving Facility. At the time of the acquisition, CenterPointe operated four acute inpatient hospitals with 306 beds and ten outpatient locations primarily in Missouri.
At the time of the acquisition, CenterPointe operated four acute inpatient hospitals with 306 beds and ten outpatient locations primarily in Missouri.
Same facility other operating expenses were $286.2 million for the year ended December 31, 2021, or 12.4% of revenue, compared to $256.0 million for the year ended December 31, 2020, or 12.3% of revenue. Income from provider relief fund.
Same facility other operating expenses were $362.6 million for the year ended December 31, 2023, or 12.5% of revenue, compared to $331.7 million for the year ended December 31, 2022, or 12.8% of revenue. Income from provider relief fund.
Same facility SWB expense was $1,115.0 million for the year ended December 31, 2021, or 48.5% of revenue, compared to $1,049.0 million for the year ended December 31, 2020, or 50.6% of revenue. Professional fees.
Same facility SWB expense was $1,396.1 million for the year ended December 31, 2023, or 48.2% of revenue, compared to $1,253.3 million for the year ended December 31, 2022, or 48.4% of revenue. Professional fees.
Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S. New Credit Facility We entered into a credit agreement establishing the New Credit Facility on March 17, 2021.
Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S.
For the year ending December 31, 2023, we expect to add approximately 300 beds through additions to existing facilities, and we expect to open two wholly-owned facilities, two joint venture facilities and at least six CTCs. We are the leading publicly traded pure-play provider of behavioral healthcare services in the U.S.
For the year ending December 31, 2024, we expect to add approximately 1,200 total beds and open up to 14 CTCs, excluding acquisitions. We are the leading publicly traded pure-play provider of behavioral healthcare services in the U.S.
Other operating expenses consisted primarily of purchased services, utilities, insurance, travel and repairs and maintenance expenses. Other operating expenses were $349.3 million for the year ended December 31, 2022, or 13.4% of revenue, compared to $301.3 million for the year ended December 31, 2021, or 13.0% of revenue.
Other operating expenses were $388.9 million for the year ended December 31, 2023, or 13.3% of revenue, compared to $349.3 million for the year ended December 31, 2022, or 13.4% of revenue.
An unused fee initially set at 0.20% per annum (subject to adjustment based on the Company’s consolidated total net leverage ratio) is payable quarterly in arrears based on the actual daily undrawn portion of the commitments in respect of the Revolving Facility.
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.
As with many other healthcare providers and other industries across the country, we are currently dealing with a tight labor market. While we experienced higher wage inflation in 2022 compared to previous years, we believe the diversity of our markets and service lines and our proactive focus helps us manage through this environment.
Similar with many other healthcare providers and other industries across the country, we continue to navigate a tight labor market. While we experienced higher wage inflation in 2023 compared to long-term historical averages, we have seen stability in our labor costs and our proactive focus helps us manage through this environment.
For the year ended December 31, 2021, we recorded $17.9 million of income from provider relief fund related to PHSSE Fund funds received in 2021 and 2020. For the year ended December 31, 2020, we recorded $32.8 million of income from provider relief fund related to $34.9 million of PHSSE Fund funds received from April through December 2020.
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. For the year ended December 31, 2022, we recorded $21.5 million of income from provider relief fund related to PHSSE Fund amounts and ARP funds received in 2021 and 2022. Depreciation and amortization.
Days sales outstanding at December 31, 2022 was 44 compared to 42 at December 31, 2021. Cash used in continuing investing activities for the year ended December 31, 2022 was $305.8 million compared to cash provided by continuing investing activities of $1,013.1 million for the year ended December 31, 2021.
Cash used in continuing investing activities for the year ended December 31, 2023 was $397.2 million compared to $305.8 million for the year ended December 31, 2022.
Supplies expense was $90.7 million for the year ended December 31, 2021, or 3.9% of revenue, compared to $87.2 million for the year ended December 31, 2020, or 4.2% of revenue.
Supplies expense was $106.0 million for the year ended December 31, 2023, or 3.6% of revenue, compared to $100.2 million for the year ended December 31, 2022, or 3.8% of revenue.
However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations.
However, there can be no assurance that any such adjustments and final settlements will not have a material effect on the Company’s financial condition or results of operations. Our cost report payables were $9.3 million and $13.7 million as of December 31, 2023 and 2022, respectively, and were included in other current liabilities on the consolidated balance sheet.
During the fourth quarter of 2021, we had a draw of $70.0 million on the Revolving Facility related to the CenterPointe acquisition. During the year ended December 31, 2022, we repaid $95.0 million of the balance outstanding on the Revolving Facility.
During the year ended December 31, 2023, we borrowed $40.0 million on the Revolving Facility and repaid $35.0 million of the balance outstanding. During the year ended December 31, 2022, we repaid $95.0 million of the balance outstanding on the Revolving Facility.
For the year ended December 31, 2021, the provision for income taxes was $67.6 million, reflecting an effective tax rate of 24.5%, compared to $40.6 million, reflecting an effective tax rate of 22.1%, for the year ended December 31, 2020.
For the year ended December 31, 2023, the benefit from income taxes was $(9.7) million, reflecting an effective tax rate of 38.2%, compared to the provision for taxes of $94.1 million, reflecting an effective tax rate of 25.2%, for the year ended December 31, 2022.
The New Credit Facility provides for a $600.0 million Revolving Facility and a $425.0 million Term Loan Facility with each maturing on March 17, 2026 unless extended in accordance with the terms of the New Credit Facility.
Credit Facility On March 17, 2021, we entered into the Credit Facility, which provides for a $600.0 million Revolving Facility and a Term Loan Facility in an initial principal amount of $425.0 million, each maturing on March 17, 2026. The Revolving Facility further provides for a $20.0 million subfacility for the issuance of letters of credit.
Routine or maintenance capital expenditures, including information technology capital expenditures, were approximately 2% of revenue for the year ended December 31, 2022. Cash provided by continuing investing activities for the year ended December 31, 2021 primarily consisted of proceeds from the U.K.
Routine or maintenance capital expenditures, including information technology capital expenditures, were approximately 3% of revenue for the year ended December 31, 2023.
Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 million and an amount equal to 100% of the Consolidated EBITDA (as defined in the New Credit Facility) of the Company and its Restricted Subsidiaries (as defined in the New Credit Facility) (as determined for the four fiscal quarter period most recently ended for which financial statements are available), and (ii) additional amounts so long as, after giving effect thereto, the Consolidated Senior Secured Net Leverage Ratio (as defined in the New Credit Facility) does not exceed 3.5 to 1.0.
Such Incremental Facilities may not exceed the sum of (i) the greater of $480.0 million and an amount equal to 100% of the Consolidated EBITDA (as defined in the Credit Facility) at the time of determination (the “Incremental Fixed Basket”), and (ii) the additional amounts that would not cause our consolidated senior secured net leverage ratio to exceed 3.5 to 1.0 (the “Incremental Ratio Basket”).
SWB expense was $1,243.8 million for the year ended December 31, 2021 compared to $1,154.5 million for the year ended December 31, 2020, an increase of $89.3 million. SWB expense included $37.5 million and $22.5 million of equity-based compensation expense for the years ended December 31, 2021 and 2020, respectively.
Salaries, wages and benefits (“SWB”) expense was $1,572.3 million for the year ended December 31, 2023 compared to $1,393.4 million for the year ended December 31, 2022, an increase of $178.9 million. SWB expense included $32.3 million and $29.6 million of equity-based compensation expense for the years ended December 31, 2023 and 2022, respectively.

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