Brent Turner - Acadia Healthcare Co., Inc. Joey A. Jacobs - Acadia Healthcare Co., Inc. David M. Duckworth - Acadia Healthcare Co., Inc..

Brian Gil Tanquilut - Jefferies LLC Whit Mayo - Robert W. Baird & Co., Inc. (Broker) A.J. Rice - UBS Securities LLC Ralph Giacobbe - Citigroup Global Markets, Inc. John W. Ransom - Raymond James & Associates, Inc. Ryan S. Daniels - William Blair & Co. LLC Ann Kathleen Hynes - Mizuho Securities USA, Inc. Chris Rigg - Deutsche Bank Securities, Inc.

Kevin Mark Fischbeck - Bank of America Merrill Lynch Charles Edward Haff - Craig-Hallum Capital Group LLC Gary P. Taylor - JPMorgan Securities LLC Ana A. Gupte - Leerink Partners LLC.

Please stand by. We're about to begin. As a reminder, this call is being recorded. Please proceed..

Good morning. I'm Brent Turner, President of Acadia Healthcare, and I'd like to welcome you to our Second Quarter 2017 Conference Call.

To the extent any non-GAAP financial measure is discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP on our website by viewing yesterday's news release under the Investors link.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements, among others, regarding Acadia's expected quarterly and annual financial performance for 2017 and beyond.

For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Acadia's filings with the Securities and Exchange Commission and in the company's second quarter news release.

And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

At this time, for opening remarks, I'll now turn the conference over to our Chairman and Chief Executive Officer, Joey Jacobs..

Good morning, everyone, and welcome to our second quarter conference call. In addition to Brent, I'm here today with our Chief Financial Officer, David Duckworth, and other members of our executive management team. David and I, each have some remarks about the second quarter and our outlook for Acadia. Then, we'll open the line for your questions.

Acadia's second quarter results exceeded our expectations and we were pleased with the improvement in our operations for the quarter. This improvement was especially clear with our stronger performance in same facility revenue on a consolidated basis and in both the U.S. and the UK.

Even though, we faced very tough comparisons for the second quarter of last year, in fact, our 6.5% consolidated same facility growth and 7.8% growth for our U.S. operations were our best rates of same facility growth for the last four quarters. As our outlook indicated, we expected our second quarter results to be better than the first quarter.

We were pleased with the results and the sequential improvement from the first quarter highlighted by revenue increase of $36.7 million, adjusted EBITDA increase of $25.9 million, margin improvement of 260 basis points, decline in salary, wages and benefits as a percentage of net revenue of 180 basis points from 54.3% to 52.5%, and adjusted EPS increased from $0.46 to $0.66.

For the second quarter, we added 91 beds and we remain on pace to open approximately 800 new beds during 2017 in existing facilities and three de novo facilities scheduled to open in the second half of the year. In the third quarter alone, we anticipate opening more than 250 beds as well as adding beds to our existing facilities.

We've also remained very focused at the individual facility level in driving additional revenues, primarily through program enhancements and other growth investments. We are continuing to actively evaluate additional acquisitions, primarily in the U.S., and we believe that we are well positioned to fund our acquisition strategy.

Additionally, given our scale, operations expertise and independence, we believe we are an attractive behavioral health joint venture partner for acute care hospitals, as evidenced by our most recent joint venture agreements in Ohio and Pennsylvania. We are very optimistic about all of our potential growth opportunities.

We remain excited for the future and confident in our team and business model. Thanks for your time this morning and your interest in Acadia. Now, here's David Duckworth to take you through the financials..

Thanks, Joey, and good morning. The company's revenue for the second quarter of 2017 was $715.9 million, a 5.4% decline from $756.5 million for the second quarter last year.

Adjusting for the impact of the divestiture, other discontinued operations and the decline in the exchange rate, the company's revenue increased 6.4% from pro forma revenue of $672.9 million for the second quarter of 2016. Adjusted earnings per diluted share was $0.66 for the second quarter this year compared with $0.73 last year.

And as detailed in the press release on a pro-forma basis, adjusted EPS increased 10% for the second quarter of 2017 from pro forma adjusted EPS of $0.60 for the second quarter of 2016. Adjusted EPS for the latest quarter excludes transaction-related expenses of $9.1 million and debt extinguishment costs of $0.8 million.

For the second quarter of 2016, adjusted EPS excludes transaction-related expenses of $6.1 million and a gain on foreign currency derivatives of $98,000. Acadia's second quarter same facility revenue increased 6.5% from the second quarter of 2016 with a 4.6% increase in patient days and a 1.8% increase in revenue per patient day.

Same facility revenue for the U.S. increased 7.8% from the second quarter of 2016 with a 6% increase in patient days and a 1.7% increase in revenue per patient day, while in the UK, same facility revenue increased 4%, patient days increased 2.8% and revenue per patient day increased 1.1%.

Same facility EBITDA margin was 26.4% compared with 26.7% for the second quarter of 2016. Acadia's tax rate on adjusted income from continuing operations before income taxes was 24.8% for the second quarter of 2017 compared with 21.7% for the second quarter of 2016.

Acadia's operating cash flow from continuing operations was $131 million for the second quarter of 2017.

Turning to our financial guidance and as announced in yesterday afternoon's news release, we adjusted our 2017 financial guidance within the previously established range, including revenue in a range of $2.85 billion to $2.87 billion, adjusted EBITDA in a range of $628 million to $635 million and adjusted diluted EPS in a range of $2.42 to $2.47.

This guidance assumes an exchange rate of $1.25 per British Pound Sterling and a tax rate of approximately 25%. Our financial guidance does not include the impact from any future acquisitions and transaction-related expenses. This concludes our prepared remarks this morning and thank you for being with us.

I will now ask Lauren to open the floor for your questions..

Thank you. Our first question comes from Brian Tanquilut with Jefferies..

Good morning, guys. Congratulations. Brent or Joey, just first question for me. You narrowed the guidance ranges and I think that there has been a lot of questioning overnight from investors on whether there is anything to read into the revenue guidance midpoint being slightly below the previous midpoint.

Is there anything you guys would be able to provide in terms of color on how you're thinking about the revenue guidance adjustment?.

Hey, Brian. Great question. No, there's not. At the beginning of the year, we set ranges as we always do. And in the middle of the year, we just tighten them up a little bit. And that's all we did here was tightened them up a little bit. There's nothing other than just we're just narrowing the ranges from the beginning of the year.

And as we saw in our second quarter results, we're doing terrific and we expect that to continue for the last six months..

I appreciate that, Joey. And then, my next question, we're obviously seeing a lot of headlines on opioid addiction and how the government's trying to fund and increase the focus on that.

So, if you don't mind just giving us some color on what your view is in terms of how Acadia could directly or indirectly benefit from all the funds being thrown at this problem.

And then also, what's your exposure is to Methadone, for example? I mean is that one way to treat this problem and what your exposure is there? So just trying to figure out how big of a benefit could to this be for Acadia?.

Well, as you know, the Cures Act and the money there is divided into two-year increments and states are beginning to work through that process of how they're going to treat more of the patients in their states for the opioid addiction.

Now, we've had positive results in one large state already where we're going to get through our system about $4 million a year in addition from the funds that have been allocated. And now, we won't – that won't all drop to the bottom. We'll take care of patients.

And then, there'll be a couple of other facilities in this network that will be sharing in this money. But states are beginning to work through this issue, and the first state to get through it and to allocate some money, we were able to get over $4 million for that..

I appreciate that color. Thank you, Joey..

Our next question comes from Whit Mayo with Robert Baird..

Hey. Thanks. Maybe just first on the volumes. Any pockets of strength to call out across any of your U.S. businesses, and maybe if you could just broadly comment on payer mix strengths..

Payer mix is very stable from the first quarter and the strength has been in our acute business, but it's been in all our businesses, but acute, once again, that's where we've been concentrating on the bed builds, it continued to be a lower higher percent of the patient days generated for the company.

And so everything else is pretty stable and we think the outlook is very positive. And as we have worked through the second quarter results and thought about it, it's very important if you're going to put up these – if you're going to meet the needs of the local community and put up good same-store growth numbers, you got to get your beds build.

And that's what we've been doing and we will build more than 800 beds this year and that's coming off of about the same number for last year. So, we're in a good position to continue to build acute beds, but we will build some beds in all areas of service and just focus on meeting the needs of the local community.

So we feel pretty good where we're at..

Okay. And maybe my next question, Brent, any just update on the UK operations, how they're trending versus your expectation. I'm just really more curious, now after the election, any change with the NHS or staffing changes.

We've seen some hiccups from some other non-behavioral providers I'm not sure that supplies to you, but just any general observations on the current environment over there would be helpful. Thanks..

Well, I think as you see from our second quarter numbers, the UK improved for us in the second quarter over the first quarter and our expectations are consistent there with what we've said is that we're going to get incremental improvements through the UK over the balance of the year.

We don't expect that market to be exactly in line with the attractive metrics of the U.S., but it's not far off, and we are not seeing just massive issues around some of the election issues. I mean, the behavioral health needs in the UK are not going away.

And so, ultimately, we believe, short-term and long-term, our facilities and our operations are well-positioned to meet the needs over there and we see good funding streams for that, again, both in the short and the long-term..

And, Whit, I'll just add that the new team we put together – Ron Fincher and David Duckworth put together in December, both of those guys just got back from the UK. And we're very pleased with where we are there and the team we've got assembled there. So, it will be a little bit a slower growth than what the U.S.

is because the metrics here are so strong. And we're very pleased with our investment in the UK and we expect them to continue just at a little slower pace..

Thank you, guys..

We'll take our next question from A.J. Rice with UBS..

Hi, everybody. Maybe just first on – I know you made the comment about the deal pipeline still being strong. I know there were some discussion about how quick you might be able to redeploy the Priory divestiture assets or cash, and larger transaction versus smaller ones.

Any further commentary along those lines?.

We have active discussions underway to do that. And we're very busy looking in acquisitions both one-offs and larger transactions, A.J. And I can't comment any further other than we're working hard on those opportunities..

Okay. Okay. Obviously, not as much for you, but to some degree, there has been discussion around the industry about the tightness of labor supply and finding both physiatrists and nurses.

Any update, you're thinking, what are you seeing in terms of turnover rates, vacant job postings and so forth, and wage updates and so forth?.

We still have – as we mentioned for the past couple of years, we have some isolated markets where it's a little tougher to find the nurses or the physiatrists, but we've got a great team in recruitment and we have provided additional resources this year into that department and we'll see them – those resources be very fruitful.

So, the labor market is tight, but we've able – Ron and his team and the recruitment department that reports to Ron have been able to find the personnel that we need to continue to put up 6% same-store patient day growth here in the U.S. So I think we can continue to do that and find the people.

On the salary wage pressures, it's in the 2% to 3% is what we're seeing for wage increases and so – but we want to be competitive in all our markets. We compete with the Med Surg hospitals and other healthcare providers. So, we think we're in a good position and have been able to work through it for these past several years..

Okay, great. Thanks a lot..

Our next question comes from Ralph Giacobbe with Citi..

Thanks. Good morning. Anyway to parse out the impact from IMD exclusion or maybe whether you think that's kind of aiding the strong U.S. volume or if that's still on the come and if you sort of feel that momentum of that can sort of be a driver into the back half..

The only thing I have in front of me is the payer mix, which we disclosed inside the quarterly report, and it's very stable. Medicaid, just Medicaid, in total, is up a little, 50 basis points from the first quarter to the second quarter, and we think it's going to stay in that range. And so, our payer mix is very, very stable.

And so the IMD, I think, is already factored in and we don't see – we just think it's a very stable payer mix..

Okay. All right. Fair enough. And then, there has been a lot on length of stay pressure in the market, particularly in the U.S. You didn't see a whole lot of that in this quarter. I guess how do you view length of stay? Do you expect there to be kind of some pressures on a go-forward basis or just general thoughts on length of stay? Thanks..

Length of stay for us has been very stable. And the length of stay, the utilization review process has always been tough and we've always done well with that process.

Our length of stay, if it does slightly decline, is more of a function of more acute patients who have shorter length of stays versus our specialty facilities or our residential facilities. So, any decline so far this year and really last year was basically just because we have more acute patients because we built all those beds.

So our length of stay is very stable and very strong..

Okay. Fair enough. Thank you..

Our next question comes from John Ransom with Raymond James..

Good morning. A couple of things. Joey, how long do you have line of sight looking out over the next, say, three to five years that you can continue to add beds in the U.S.

at this 800 beds level?.

I see it accelerating, John. I don't -.

Okay..

So not only are we going to maintain it, I think there's an opportunity that we could actually build more beds over the next three to five years. So if you were to average it, I think over the next three to five years, it's going to be above 800 beds.

We see the demand and the access these patients need, and our people in the field, Ron Fincher once again, and the team there that he's put together. And whenever we go over the bed build reports, that's an exciting time of the month because we see all the opportunities for the next 18 months. So we're very bullish on the next three to five years..

Great. Secondly, just hypothetically, let's say there was a deal somewhere north of $500 million in the U.S.

Other than – would you be inclined to raise equity at that point to keep the leverage or would you look at maybe sale leaseback some of your mature facilities? Or how are you thinking through – or should we just worry about that bridge if you decide to cross it?.

I think as you've seen we've always done in the past, is when we come up to a large acquisition, we look at what is the best way to finance that transaction to give return to all of our shareholders.

And I think if it was a transaction of the size of what you described, we pretty much know the sellers there and it's possible that they take some of the purchase price in shares of Acadia.

But once again, we would look at the balance sheet at the time of the transaction and find the best, most efficient way to finance it to return value to our shareholders..

Fair enough. And then, my last question, and this is just more kind of accounting minutiae.

As you start to build these de novos, on your reported financials are you going to add back start-up losses into your adjusted EPS and adjusted EBITDA numbers?.

We have no intention to do that. That's something we'll think about, John. We have no intention to do that. If it becomes something that we think we disclose, I think, in the past, we just verbally disclosed it..

Okay.

And I think the last number you gave was 20, is that still the right number or has that number changed, as in de novo projects?.

Oh, John, it could be more than 20..

Okay. All right. Fair enough. Thank you..

Our next question goes to Ryan Daniels at William Blair..

Yeah, guys. Thanks for taking the question. I want to do a follow-up on the UK operations.

I know you said the expectation, Brent, is for that to continue to improve, but number one how closer you want to achieve the $20 million in annualized synergies as of this quarter? And then, number two, with a fully integrated care continuum in the UK, I'm curious if you're starting to see more referrals or if it's helping your volumes by keeping the patient in the system longer now that that's been integrated?.

Okay. Ryan, I think David can give us the exact, but we're on track on the synergies, making continuing progress to meet or exceed the $20 million in synergy savings there now that we've been able to integrate the two businesses and work those.

I think we actually have been positioned well across the continuum, even back to our former acquisition in 2014.

And so, again, I think our belief there is that our positioning across the different levels of care and our commitment to invest capital in the UK and add beds were needed really positions us well to keep those patients in our system and really see them throughout the process. So we think there's good stability there from that standpoint..

And Ryan, this is David. I'll just confirm. Our team in the UK has done a fantastic job on the integration. We are still on track to achieve the $20 million synergy target in the second half of the year..

Okay. Perfect. And then, as my follow-up, just a quick question on the same-store EBITDA margins. Obviously, a nice improvement versus the trend in the first quarter, so congrats on that. But still curious, given the strong U.S. same-store growth, if you anticipate seeing kind of better margin expansion in the future.

I know it was down about 20 basis points year-over-year this quarter. Thanks..

The 20 basis points decline over last year, last year's number was the highest this company's ever had. So the 28.4, we're absolutely pleased with that number. And so, there's not a lot of concern here about the 20 basis points. That is more a factor of last year.

This was the best quarter that we ever had on that margin number, I think, or since 2013 maybe, and the 28.4, that's pretty strong..

Okay, great. Thanks, guys..

Our next question comes from Ann Hynes with Mizuho Securities..

Good morning. Thanks.

Going back to the UK, can you talk about the reimbursement environment over there and what you expect for the next 12 months because I think you just finished the negotiations?.

Yes. Ann, this is Joey and good to talk you this morning. We are averaging more than 1% increase in the pricing over there for this year and we would expect that to be similar next year.

And one benefit that we're getting is that the NHS – our contracts directly with the NHS, their percentage is declining and we're negotiating more with the local communities, agencies that control the rates and we're doing okay there. And so we think next year will look a lot like this year, over 1% increase in the rate..

Okay, great. And just staying on the UK, I know there's some thought with Brexit that the NIH could start outsourcing more of their beds to the private payers.

Are you seeing that at all yet or do you expect that?.

Our team over there is cautiously optimistic that we think the NHS will close more of their beds. And when that does occur, they look to us. And they've already given us some beds that they need and the service lines that they need that we are building for them.

And right now, I think we have more than 200 beds that are in that category where we're trying to meet the NHS's needs for these services. So, we have a good relationship with NHS and they know we have access to capital and they know that we will build as necessary to meet the needs, if they continue to close their beds..

Okay, great.

Can I have a follow-up question, I think, that John asked? On the de novo expenses, is it $20 million that's embedded in guidance of startup costs?.

No. No..

Okay..

John jumped to the overall outlook for de novo and joint venture opportunities with medical surgical hospital systems..

Okay..

And so our pipeline is more than 20 and it's nothing to do with $20 million of expenses..

No..

Okay.

So, what are the expenses embedded in guidance, for the start-up cost I should say?.

We do have three facilities coming on in the second half of the year. Just ballpark number, they maybe a couple million of start-up losses that we would incur in the second half of the year, but just thinking back to last few years, we have opened facilities every year.

So we think about that for us is just a normal part of a year because we just continue to open those new facilities. We had it last year and we may have it in the second part of this year..

Okay. Thanks..

And if we think it's material, we will disclose the number on the call..

Okay. Thanks..

We'll take our next question from Chris Rigg with Deutsche Bank..

Good morning. Just wanted to ask about capital deployment, obviously, you're talking about robust M&A pipeline and same on the organic bed development side.

How do you think about deploying that capital versus the return you get? Do you get a better return on the M&A versus the organic beds?.

No. Obviously, the organic bed is incremental patients to us and that we spread the overhead of that facility across those extra patients.

So, always, with us, the best return is put them in the bed we have, if not, build the bed to the existing facility, and then look for good acquisitions that meet those characteristics of growth and in a market that can grow and that has been underserved. So that is how capital is deployed in the company..

Right. Okay.

And then, with regard to the M&A pipeline, do you see more opportunity on the acute sort of behavioral side or is it substance abuse or residential treatment or where do you see a majority of the opportunities right now?.

We will continue to concentrate on the acute side. It would be the one-off transactions that might be on the addiction side. So, it's more on the acute side, maybe one-offs on the addiction, maybe one-off on the CTC opportunity that we have.

So, there is too many substance abuse companies that have popped up over the last five years that do not have a long enough track record for our due diligence. So I turned down probably one a month of those just because they don't get through the due diligence..

Right. Okay. And then just one follow-up here and sorry, it's just not clear to me. But when I think about the very modest margin pressure domestically overlaid with the startup costs from the new beds, is that factoring into the same-store margin pressure or is that not the case? Thanks..

That is the case because everything is now in the U.S. same-store numbers..

Okay, great. Thanks a lot..

We'll take our next question from Kevin Fischbeck with Bank of America..

Great. Thanks. I guess, sequentially, the revenue acceleration on a same-store basis in the U.S, obviously, a little bit of a volume pickup, but really just more on rate.

So is there anything that you would highlight there around rates?.

It's a focus of operations to be prompt in their renegotiation of the contracts and we've been getting some positive increases. So that is what's happening to the rate increases is that we do have more awareness, review, expectation that they're making sure they're renegotiating their contracts more timely..

Okay. And I guess just to go back to that startup loss question.

You said couple of million dollars, is that couple of million dollars per site that you are assuming there, is that couple of million dollars overall in startup losses in the second half?.

That's overall in the second half of the year..

Okay.

Is that weighted to Q3 or Q4?.

No, it would be spread over the quarter. And part of that is just the timing of when we're bringing these facilities on. We think that over the first year, they're breakeven, but just happening late in the year like this, the six-month period would absorb more of those losses, but that's for all three combined, Kevin..

Okay, great. Thank you..

Our next question comes from Charles Haff with Craig-Hallum..

Hi. Thanks for taking my questions. In terms of the 91 beds you added this quarter and the 250 you expect next quarter, do you have an approximate split between U.S.

and UK there?.

Yes, we do.

Do you have that David?.

Yes, we do. Most of the beds this quarter were in the U.S., 80 of the 91. In the first quarter, 30 of the 82 were in the U.S. And we will see – for the second half of the year, we will – obviously with the new facilities in the U.S., we will see most of those beds coming on in the U.S..

Okay, great.

And the three JV openings that you have in the second half of this year, can you just remind us which facilities those are and how many beds they will be and when they're going to open?.

Well, the three facilities are located in Louisiana, Virginia and Arkansas. There's probably 200 beds for those three facilities. So they equal about 70 beds a piece..

Perfect. Thank you.

And then, on the labor side of things, have you found that you're having to use signing bonuses for some of those pockets where you're seeing some labor challenges?.

Not for the nurses or the medical – other medical individuals that we might need in the hospital. Where we see signing bonuses, which has been customary for years, ever since I was at HCA, for physicians. That is just a part of the package that goes when you recruit a physician, that there's usually a signing bonus..

Okay, but not for the nurses. You're not using those yet..

No..

Okay..

And have no intentions of doing that. Now, I can't say that Butte, Montana might be using it, but 99% of our facilities are not using that..

Great. Okay, great. Congratulations on a good quarter..

Thanks..

We'll take our next question from Gary Taylor at JPMorgan..

Hi. Good morning. Yeah, I'd also say good job on the growth. I think you'll be the only provider whose trends improve sequentially this quarter. So that's really good to see..

So, Gary, is that going to be your headline?.

I think it already was. I thought you read those as soon as they came out. You must have missed that one..

I don't know if I missed it, but the best of the best would be a good title..

I'll take it under consideration..

Okay.

What's up, Gary?.

Two quick questions. One is just coming back to length of stay a little bit, which in the U.S. obviously was almost flat. It was barely down. In the first quarter, it was more of an issue. It was down about 2.5%. And at the time, you said it was really nothing. It's normal fluctuation.

And obviously, this quarter's results would suggest your intuition was correct there. But I'm just trying to think about – your average length of stay actually is up a little bit, 16.5 days versus 16.1 days in the first quarter and you talked about more inpatient beds, acute beds coming into that and obviously the length of stay is lower there.

So, that wasn't quite a driver sequentially. So, I guess, we're splitting hairs looking at pretty small changes. But given that UHS has talked about some managed Medicaid plans, essentially approving fewer days in some states, I just wanted to come back, maybe ask that question directly.

Have you seen any of the managed Medicaid plans being more stingy in terms of number of days they're willing to approve?.

I have to go back. Utilization review has always been – in this industry been very tough. And our length of stay by payer, Medicare, we run about 12 to 13 days. And you can imagine the patient is older and takes a little bit longer to respond to the treatment of the pharmacology and the social issues that they may have. Commercial, that's me and you.

We would probably stay seven to eight days. And that's pretty much been what it's been in the industry. And then on Medicaid, they're pretty similar to the seven to eight days. So, we might find a market where Medicaid might be six days, but we also might find a market where Medicaid is nine days.

And so, the length of stay, as you mentioned, basically is flat and it's very stable. And I will give one peek on the length of stay inside the acute patient day length of stay was 9.2 days in the second quarter of last year and then this year, it's 9.5 days. So that's slightly up, but the grand total is flat.

So, hopefully, we don't see a reduction here, or you know, whatever. So we feel real good about the stability of the length of stay and even in the stability of the length of stay in the Medicaid population..

Okay. And then one quick one, one last one, if I could. Really, appreciate the pro forma analysis taking out the divestitures and the FX because that certainly gets harder for us to do as we move all the way down to EPS. But the question is that pro forma EPS grew about 10% year-over-year.

You've always been very willing to talk long-term about top line growth, bed growth, facility growth, including stay a little bit.

How would you characterize what you think three to five year EPS growth should look like?.

For the same facility group, Gary, I think we're going to grow it lower double-digits. Now, what we want to do is add another 7% to 8% growth through acquisitions or through the joint ventures. So that's kind of how we're looking at it. And if we get all that accomplished in the year, then we're going to see EPS grow 18% and you can add 2%.

To do the range, I would do 16% to 20% would be the range long-term and this is looking out kind of like what John did on bed builds looking out. This is us looking out over the next three to five years. That would be our expectations..

Okay. Thank you..

Our next question comes from Ana Gupte with Leerink Partners..

Hi. Thanks. Good morning. The question I have is you have a peer, and we only have the two of you to really observe, has that regulatory coding issues, has that clinical staffing issue, is now also speaking about a length of stay pressure from payers and the mix shifting to Medicaid and the like.

And it's somewhat corroborated by some of the channel checks we've done at least the last one, but you're not seeing it, which is really great, and you had a good quarter.

Is this really that the pressures don't exist or is there something about being a best-in-class in-patient operator? And can you talk about what that might be that makes you able to deliver that better?.

Well, Ana, yes, we had a terrific quarter, second quarter was terrific, but you can look at the year-to-date numbers and they're terrific. We – obviously, I think our team is better than other people – other companies. Obviously, I think that we cheerlead that.

I think a factor that you can't quantify is, and Ron and all the senior management, we have a very much a different culture inside Acadia and we try to have a lot of fun and we try to work hard and we try to hit our expectations, and we happen to be in markets where we can do that.

And the length of stay, it may go down for us, but so far, we don't see that and we haven't really seen it in the past, when acute patient days, length of stay is 9.5 days.

And if you go back to the industry studies, this has been since the mid 1990s, average length of stay for a adult has been in the 9 to 10 days and we are right in the middle of that for the second quarter.

And it could be just the composition of our programs and our beds and our markets, but more importantly, my hats off to our operations team, Ron and that group are unbelievable..

Helpful. Thanks, Joey. Just to follow-up on that, if you tie this to policy. This morning, the Senate didn't get their vote through.

On the commercial side, is the likelihood now that essential benefits don't get repealed not just – is it helpful not just for Medicaid, but because there's an interface with mental health parities that we were hearing that it'll actually help you or at least not hurt you on the commercial side? And then, if you can talk about what CMS is proposing around behavioral health and value-based care? And how that even ties to Medicaid Advantage where plans are, as we're hearing, pushing more to do just consults in the long-term care setting and not have – more outpatient and not admit patients..

That's a lot in that question, Ana. First is we're glad the bill was defeated. I've not been a fan of John McCain, but I'm going to send him a get-well card. So as I have kind of said all along, I think nothing was going to happen this year and it appears that nothing is going to happen.

And then, hey, this will come back up next year I think, but we're positioned well. And at the end of the day, are you providing a service for a patient that needs it? Absolutely. And can you get a reasonable reimbursement for that, then you can make a business model.

As far as the value-based, our association, our company, we are responding to the CMS on this issue and we'll just have to wait and see. The discussions are just beginning now on that issue. And our team is prepared and so is our association is very much prepared for discussions on this issue..

Thanks so much. Appreciate the color..

And we have a follow-up question from Brian Tanquilut with Jefferies..

Hey, Joey or Brent, just as we think about the cadence for the back – where guidance is and how you're thinking about the distribution between the next two quarters, but without giving quarterly guidance, so are there anything you would call out other than the start-up costs for the hospitals being spread out evenly or pro rata between the two quarters, anything that we should be thinking about?.

No, Brian, I think you should just – again, we tightened the range just to reflect that we're half way through the year and I think you take the balance and split it in half and you're going to be pretty close for the third and fourth quarter..

Okay, got you. All right. Thanks, guys..

It appears there are no further questions at this time. I'd like to turn the conference back to Mr. Jacobs for any additional or closing remarks..

Just thanks for tuning in and listen to the Acadia story. I just got back from Virginia on a new facility we got there and had a great visit and we'll look forward to talking to you at the end of the third quarter..

And with that, that does conclude today's conference. We thank you for your participation..