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Acadia Healthcare Shares Plummet as Litigation Costs Explode Beyond Expectations

MarketDash Editorial Team
5 days ago
Acadia Healthcare shares crashed after the company slashed its 2025 guidance, revealing a dramatic spike in patient-related lawsuit expenses that will nearly double from last year's levels.

When a healthcare company warns about litigation costs doubling, investors tend to head for the exits. That's exactly what happened Wednesday to Acadia Healthcare Company, Inc. (ACHC), which saw its stock crater after revealing that patient-related lawsuits are about to get very, very expensive.

The behavioral healthcare provider completed its annual actuarial review and discovered something unpleasant: professional and general liability costs are spiraling upward faster than anyone anticipated. After crunching the numbers with third-party actuaries, Acadia decided it needed to slash its 2025 outlook considerably.

Here's the damage. Adjusted EBITDA guidance got chopped to $601 million-$611 million from the previous $650 million-$660 million range. Adjusted earnings per share dropped to $1.94-$2.04, down from the earlier forecast of $2.35-$2.45. Those aren't small adjustments.

The culprit? Professional and general liability expenses are now expected to hit roughly $116 million in 2025, compared with just $54 million in 2024. That's more than doubling in a single year, which explains why investors weren't exactly thrilled with the news.

The company's net liability for these issues is also ballooning, projected to reach $145 million-$165 million, up from $78 million at the end of last year. And the pain doesn't stop in 2025—Acadia anticipates these costs will remain elevated at $100 million-$110 million in 2026.

What's Driving the Surge?

Acadia pointed to a 168% increase in claim frequency as a major factor. The company is also boosting reserves for incurred-but-not-reported claims, which are essentially lawsuits that have happened but haven't been formally filed yet. It's the legal equivalent of a ticking time bomb.

This isn't the first time Acadia has had to revise its outlook downward recently. Just last month, the company reported third-quarter adjusted EPS of 72 cents, beating the 67-cent consensus, with revenue of $851.573 million topping the $845.733 million estimate. Solid quarter, right?

Not quite. Even then, Acadia cut its full-year 2025 guidance, lowering adjusted EPS to $2.35-$2.45 from $2.45-$2.65, below the $2.48 consensus. Revenue guidance also got trimmed to $3.280 billion-$3.300 billion from $3.300 billion-$3.350 billion, versus analyst expectations of $3.315 billion.

This latest guidance cut compounds those earlier concerns, revealing that the litigation issue is worse than initially thought. Shares were trading down 26.50% at $12.11 in premarket action Wednesday, a significant one-day decline that reflects just how surprised the market was by the severity of these cost increases.

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Acadia Healthcare Shares Plummet as Litigation Costs Explode Beyond Expectations

MarketDash Editorial Team
5 days ago
Acadia Healthcare shares crashed after the company slashed its 2025 guidance, revealing a dramatic spike in patient-related lawsuit expenses that will nearly double from last year's levels.

When a healthcare company warns about litigation costs doubling, investors tend to head for the exits. That's exactly what happened Wednesday to Acadia Healthcare Company, Inc. (ACHC), which saw its stock crater after revealing that patient-related lawsuits are about to get very, very expensive.

The behavioral healthcare provider completed its annual actuarial review and discovered something unpleasant: professional and general liability costs are spiraling upward faster than anyone anticipated. After crunching the numbers with third-party actuaries, Acadia decided it needed to slash its 2025 outlook considerably.

Here's the damage. Adjusted EBITDA guidance got chopped to $601 million-$611 million from the previous $650 million-$660 million range. Adjusted earnings per share dropped to $1.94-$2.04, down from the earlier forecast of $2.35-$2.45. Those aren't small adjustments.

The culprit? Professional and general liability expenses are now expected to hit roughly $116 million in 2025, compared with just $54 million in 2024. That's more than doubling in a single year, which explains why investors weren't exactly thrilled with the news.

The company's net liability for these issues is also ballooning, projected to reach $145 million-$165 million, up from $78 million at the end of last year. And the pain doesn't stop in 2025—Acadia anticipates these costs will remain elevated at $100 million-$110 million in 2026.

What's Driving the Surge?

Acadia pointed to a 168% increase in claim frequency as a major factor. The company is also boosting reserves for incurred-but-not-reported claims, which are essentially lawsuits that have happened but haven't been formally filed yet. It's the legal equivalent of a ticking time bomb.

This isn't the first time Acadia has had to revise its outlook downward recently. Just last month, the company reported third-quarter adjusted EPS of 72 cents, beating the 67-cent consensus, with revenue of $851.573 million topping the $845.733 million estimate. Solid quarter, right?

Not quite. Even then, Acadia cut its full-year 2025 guidance, lowering adjusted EPS to $2.35-$2.45 from $2.45-$2.65, below the $2.48 consensus. Revenue guidance also got trimmed to $3.280 billion-$3.300 billion from $3.300 billion-$3.350 billion, versus analyst expectations of $3.315 billion.

This latest guidance cut compounds those earlier concerns, revealing that the litigation issue is worse than initially thought. Shares were trading down 26.50% at $12.11 in premarket action Wednesday, a significant one-day decline that reflects just how surprised the market was by the severity of these cost increases.