New Opportunities for Affordable Care in Treatment of Substance Use Disorder

The behavioral health industry has mushroomed in recent years, largely driven by an alarming rise in the misuse and abuse of opioids. In 2010, the Patient Protection and Affordable Care Act (ACA) opened the door to a new way of handling substance abuse by integrating substance use disorder (SUD) treatment into the main health care system. The result has been an expansion in facilities to treat substance abuse and addiction. Today, opportunities for affordable care in the behavioral health system have never looked better thanks to a mix of large and small companies like Greenestone Healthcare Corp. (GRST), (GRST Profile) Universal Health Services, Inc. (UHS), Universal Health Realty Income Trust (UHT), Acadia Healthcare Company Inc. (ACHC) and American Addiction Centers AAC Holdings Inc. (AAC).

In the past, SUD treatment regimens were ‘carved out’ from the main health care system and concentrated on acute interventions to reduce costs and improve care for the more serious cases of abuse and addiction. But SUD requires a longer-term focus since it is a chronic condition. As any alcoholic will readily admit, he may have stopped drinking but he is not “cured.”

A chronic care regimen integrated into the main health care system has the benefit of identifying at-risk patients and providing services that reduce the risk of relapse. Integrated systems have produced better outcomes, as a number of studies have shown (1). And such programs are facilitated by the ACA, which mandates that insurance coverage for SUD treatment be “no more restrictive” than any other medical or surgical procedure.

Years after the passage of this provision, it finally bared its teeth. Last fall, after pressure from New York’s Attorney General, Eric T. Schneiderman, Cigna dropped a requirement that doctors should seek ‘prior authorization’ before prescribing medications to treat withdrawal systems and other drug abuse and addiction conditions (http://nnw.fm/V1mTm). Other insurance companies have taken note. In January, Anthem followed suit. And, more recently, so did Aetna.

The rule has long had its critics. Physicians argue that telling an addict to return tomorrow or next week to start a recovery program most likely means never seeing that person again, and that it is, in effect, an institutionalized system of procrastination that raises both the dollar and human costs of SUD treatment. With this hurdle now out of the way, there is likely to be a substantial expansion of substance abuse and addiction services in facilities across the nation, allowing companies like GreeneStone Healthcare (GRST) to stretch its legs.

GreeneStone, with a market cap of over $7 million, operates in the behavioral healthcare space, specifically in the treatment of SUDs. The company has developed a unique style of treatment, and within the last six years reports great success with in-patient treatment for adults.

The company recently announced an initiative designed to strengthen its balance sheet and position it for sustainable growth in the U.S. health care market. The strategy started with GreeneStone’s acquisition of Cranberry Cove Holdings, which owns the real estate used by GreeneStone’s addiction treatment facility in Muskoka, Canada. GreeneStone then sold the operational assets of its Muskoka clinic, and through its newly acquired subsidiary will continue to own and lease the clinic building. GreeneStone then acquired the business and real estate assets of Seastone addiction treatment center in Delray Beach, Florida.  The treatment model is an individualized program based on and in-depth assessment to identify root causes of addiction and co-occurring disorders – an approach well aligned with the previously mentioned benefits of integrating a chronic care regimen into the main health care system.

Another player in the behavioral health sector is Universal Health Services (UHS), one of the largest hospital management companies in the United States. Through its subsidiaries, UHS operates 24 inpatient acute care hospitals, three free-standing emergency departments, 213 inpatient and 16 outpatient behavioral health care facilities located in 37 states, Washington, D.C., the United Kingdom, Puerto Rico and the U.S. Virgin Islands. The company has a market cap exceeding $12 billion. With a consensus price target of over $134, the stock is currently trading around $125.

Universal Health Realty Income Trust (UHT), which commenced operations on December 24, 1986, is a real estate investment trust specializing in healthcare and human service related facilities. As of September 30, 2016, the trust had 65 investments in 20 states, including acute care hospitals, medical office buildings, rehabilitation hospitals, sub-acute care facilities, freestanding emergency departments and childcare centers. Based in King of Prussia, Pennsylvania, it has a market cap of around $853 million. The stock, currently trading at about $64, has a consensus target price of $93.

American Addiction Centers, going by the name, AAC Holdings (AAC) is a leading provider of inpatient substance abuse treatment services. Its facilities offer treatment to adults struggling with drug addiction, alcohol addiction, and co-occurring mental/behavioral health issues. The company has a market cap of around $183 million. Its stock, currently trading just under $8, has been set a consensus price target of $13.

With a market cap of roughly $3.8 billion, Acadia Healthcare Company (ACHC) rests on the heavy end of the primary behavioral health players. Its stock, currently trading around $45, has had a consensus target price of $51 set by industry analysts. The company is a provider of inpatient behavioral healthcare services. It operates a network of 568 behavioral healthcare facilities with approximately 16,900 beds in 39 states, the United Kingdom and Puerto Rico. Acadia provides behavioral health and addiction services to its patients in a variety of settings, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs. Acadia recently posted fourth-quarter revenue of $702.9 million, up 41.9 percent compared to $495.3 million for the fourth quarter of 2015. Net income from continuing operations attributable to Acadia stockholders was $41.8 million, up 21.1% from $34.5 million for the fourth quarter of 2015.

Source: 1. http://nnw.fm/semM8

For more information on GreeneStone please visit: GreeneStone Healthcare (GRST)

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