Acadia Healthcare Company Inc (ACHC) 2017 Q4 法說會逐字稿

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 fourth quarter 2017 conference call.

To the extent any non-GAAP financial measures are 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 2018 and beyond. For this purpose, any statements made during the 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 our fourth 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.

Thanks, Brent. Good morning, and thank you for being with us today for our fourth 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 fourth quarter and our outlook for 2018, then we'll open the line for your questions.

We are pleased with the overall performance for the fourth quarter. Our results met or exceeded our revised expectations. Total same facility revenue for the fourth quarter of 2017 increased 5.6% as compared to the fourth quarter of 2016. U.S. same facility revenue for the quarter increased 6.6% from the fourth quarter of 2016. U.K. same facility revenue for the quarter increased 3.7% from the fourth quarter of 2016.

During 2017, we added 750 beds to existing and 2 new facilities, which contributed significantly to the increase in total same facility revenue for the fourth quarter. This included the addition of 398 beds during the fourth quarter, with 258 of these beds added in the U.S. and 140 added in the U.K.

For 2018, we expect to add more than 800 beds to existing and new facilities, with about 75% of these beds expected in the U.S. We have 2 joint ventures and 2 company-owned de novos scheduled to open in 2018. While we did complete the acquisition of a 36-bed education facility in the U.K. during the fourth quarter, we expect our capital priorities for 2018 will be focused on bed additions to our existing facilities, building joint venture and company-owned de novo facilities and debt repayment.

We have entered 2018 optimistic about our prospects for growth during the year. We remain focused on the U.K. operations. In the short term, we are working to mitigate the impact of a rollout to Italy, weak rebound in census in the latter month of 2017 and the increased cost of agency labor.

Longer term, we expect to manage through both of these issues by investing in initiatives to drive increased census, recruit additional nurses and clinical staff, improve our real-time labor management and negotiate appropriate reimbursement for the care we provide.

We have implemented several initiatives to help manage our agency labor, including a new reporting tool. Facilities are now required to track their agency hours on a daily basis. With the help from these initiatives, we are starting to see improvement in our agency labor. In January, agency expense as a percent of total labor declined to 11.4% from 12% in December. We expect this improvement to continue throughout 2018. As a percentage of revenue, total labor cost, including agency labor, are expected to decline from 65% in the fourth quarter of 2017 to less than 64% for 2018.

We would also like to provide some guidelines for our same facility metrics in 2018. We expect same facility revenue to grow in the mid-single digits. Same facility EBITDA margins are expected the same or slightly up. Despite some expected challenges in 2018, favorable dynamics related to demand and capacity, access and parity continue to support the growth potential of behavioral health care in the U.S. and the U.K. markets. We believe Acadia is well positioned to leverage these dynamics to create further long-term growth in our earnings and shareholder value.

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 fourth quarter of 2017 was $724.5 million, an increase of 3.1% from $702.9 million for the fourth quarter of 2016. Adjusted earnings per diluted share increased 3.4% to $0.61 for the fourth quarter of 2017 compared with $0.59 for the fourth quarter of 2016. Adjusted EPS for the latest quarter excludes the tax benefit of $20.2 million due to the impact of the Tax Cuts and Jobs Act and transaction-related expenses of $5.4 million. Also, the 22 facilities in the U.K. that were divested on November 30, 2016, contributed revenue of approximately $30 million and adjusted EPS of approximately $0.05 to the result of operations for the fourth quarter of 2016.

Acadia's total same facility revenue growth for the fourth quarter was 5.6%, which included a 2.4% increase in patient days and a 3.1% increase in revenue per patient day. Total same facility EBITDA margin was 24.5% compared with 24.9% for the fourth quarter of 2016.

Same facility revenue for our U.S. operations increased 6.6% for the fourth quarter compared with the fourth quarter of 2016 on a 3.1% increase in patient days and a 3.3% increase in revenue per patient day. Same facility EBITDA margin was 26.3% for the fourth quarter, even with the fourth quarter of 2016.

Same facility revenue for our operations in the U.K. increased 3.7% for the fourth quarter compared with the fourth quarter of 2016. Patient days increased 1.5% and revenue per patient day grew 2.2%. Same facility EBITDA margin in the U.K. was 21.1% for the fourth quarter compared to 22.3% for the fourth quarter of 2016. The company's consolidated adjusted EBITDA for the fourth quarter of 2017 was $153.5 million or 21.2% of revenue.

Acadia's tax rate on adjusted income from continuing operations before income taxes was 23.7% for the full year 2017, which reflects a tax rate of 19.9% for the fourth quarter compared with 18% for the fourth quarter of 2016. Acadia's operating cash flow from continuing operations was $128.7 million for the fourth quarter of 2017, a 20.7% increase from $106.6 million for the fourth quarter of 2016.

Turning to our financial guidance, and as announced in yesterday afternoon's news release, we have established our 2018 financial guidance based on our results for the fourth quarter and full year 2017 and our outlook for 2018. Our guidance includes: revenue in a range of $3.04 billion to $3.08 billion; adjusted EBITDA in a range of $637 million to $644 million; adjusted diluted EPS in a range of $2.42 to $2.48; and an exchange rate of $1.35 per British pound sterling; and a tax rate of approximately 21%. We expect adjusted earnings per diluted share for the first quarter of 2018 in a range of $0.47 to $0.49. Our financial guidance does not include the impact from any future acquisitions or transaction-related expenses.

This concludes our prepared remarks this morning, and thank you for being with us. I'll now ask Rochelle to open the floor for your questions.

(Operator Instructions) And we'll take Brian Tanquilut with Jefferies.

David, first question for you. As I think about your guidance, you're using the FX at $1.35. The average is, year-to-date so far, at about $1.39. How should I think about your conservatism? Is that what that is and also, the added 350 beds in Q4 alone -- or almost 400 beds in Q4 alone. So putting all that together, I mean, should I be thinking about the guidance as having enough dose of conservatism in there in -- just putting those 2 factors in?

I think, Brian, on the forecast that we have for the exchange rate, we do look at the history of it, and it has been strong for several months now. But we do like to build in some conservatism. So you're right that, if we can maintain the exchange rate where it is today, there is some upside that is built into our guidance. And then on the new beds, that's factored into a ramp-up over the course of 2018. We had a great quarter, been adding beds to our facilities and opening 2 new facilities during the quarter. And the ramp-up in those new facilities, the new beds is factored into our guidance.

Got you. And then my follow-up for Joey. As I think about the Cures bill and then the recent tax bill that passed with opioid addiction funding, how are you thinking about the flow-through of that? And how Acadia will realize the benefit from the incremental dollars the government's throwing at the opioid epidemic?

Well, obviously, it's a positive that -- not only the Cures Act, but they did put additional monies in during the budgeting process. And that the federal government wants to help the states on this issue. Unfortunately, you have to go through the states. The money will go to the states, and they will find a way to get it for treatment. We think all the money should go towards the treatment process. We've had some early successes in 3 states, where the Cures Act has made it through the state and is actually being used today to give better treatment, more access to the patients. So we think the other states are going to follow. So with a couple of those being the largest states in the country population-wise, that they are aggressively moving towards getting that money to work in treating the patients. And we have lobbyists in every state, working with the states and communicating our position on how we think this money should be used. We know that some of the money will go towards education, which it should. But really, it should go to the treatment of these patients, and so it's a positive. There's no way we can quantify it today. We could, for the 3 states that we're already in, we have a pretty good idea how much money that is. But we need more states to actually get it implemented and start flowing the funds. But it's absolutely a positive and absolutely something this country needs. And since we're the largest provider, we think we will be the largest recipient of the monies to expand access and treatments for these patients.

And next, we move on to A.J. Rice with Crédit Suisse.

First of all, let me just ask a little bit about your comments around the debt. You said that part of the priorities for cash flow were paying down debt. Is there an updated target? I think, at the end of the quarter, you were at -- or year, you were at 4.9x net debt-to-EBITDA. Do you have a target? And is there any opportunity or assumptions you're making about reworking where you're borrowing is to maybe get better benefit from the tax reform? I think you had a little bit of a mismatch. And if you'll assume that you reduce the refinancing or something, that would make a difference on that?

Yes, A.J., I think, our leverage at the end of the year is actually a little above 5x. And if you look through -- if you read through our guidance and the growth in EBITDA combined with the debt paydown, we expect to be below 5x during 2018. And we are working and thinking about the debt restructurings, where we can get some benefit. We do have a slight amount of debt that is excluded from the deductibility. And any improvement we can do there will help us maximize our tax benefit. So we're working on some of those items as well.

I guess, is there an assumption in the interest expense for 2018 that assumes either a refinancing or you'll assume some step-up in interest rates in any way?

A.J., this is David. We are building in some increase in our interest expense for next year. We're projecting interest expense of just over $180 million. And that does factor in what rates are projected to do. We are also planning and have factored into the guidance that we would make some debt repayments. We have $35 million of mandatory debt repayments for the year. But it would expect cash flows to support that we can make more debt repayment than that. And the tax rate, our 21% tax rate does factor in that there's about $15 million of interest, but that's the tax effect of the disallowed interest. But as Brent said, we are planning to minimize that effect and think that as earnings grow, that the impact of that would be reduced as we think ahead to 2019 and going forward.

Okay. And maybe just real quick, my other question. In your prepared remarks, I think Joey's comments maybe in -- it sounds like now, you're describing the labor issues. The agency is almost more what I would describe as a management and needing more tools to manage that as opposed to just, say, a market situation that there's not much you can do about. Is that the right way to characterize the way you're looking at it now? And you did refer to the census in the U.K. rebounding a little slower. Is there any update or any discussions with NHS that suggests that maybe that can get corrected?

Sure, A.J. Let me tackle the late -- agency costs first. There still is an acute shortage of nurses in the U.K. But through better management and some initiatives that we have started, we're beginning to see the benefit of that. But there is a crisis about clinical and nurse agency -- nurses there that won't go away any time soon. Saying that, some of these shortage is in isolated markets. And so it's not totally across the U.K. It's in some isolated markets. Some of the rural markets are very difficult. There's not the nurse there in the community that we need, so we have to relocate the nurse there and take it -- take the approach there. And then some of the urban areas, we have a couple of locations where there's more of a nurse -- nursing shortage. But we're working through that. Now we're very pleased to see the monthly progress that our team in the U.K. is doing, and we want them to stay focused. We are doing a better job in using our part-time and full-time employees that need -- that would like to work an additional shift. So if we can get more of our own internal employees to do that, then obviously, that replaces the agency expense. We are meeting with the minister -- we have met with the minister of health and other government agency officials there. And there's a lot of talk about, should the nurse staffing companies be capped in how much they could charge a facility, whether it's our facilities or a med/surg facility. So there's talk like that. There is also talk about how can we do an exception or a workaround the issue of migrating into the U.K. So we see positive signs. And we're going to take them, and we're going to work real hard. We're doing a better job internally managing it than we did, say, in the second and third quarter of last year. So I'm upbeat there, but we have to execute. We have to execute there. And then the latter part of your question was?

Relative to the census rebound in the U.K.

The U.K., is -- as we mentioned on previous calls, the U.K. is going through a transition process of letting the local areas determine the patients and the flow of patients. And they've started. And it should have been done by now, we think. But they haven't got it completed. And as we look -- we think -- our team in the U.K. estimates that it will take another year before these local communities fully transition this in. Now saying that, our education business is doing extremely well. Our health care business is now hitting all-time highs on their census. So there's, internally, over in the U.K., there are some bright spots. And we want to continue to do that. We're taking some of the unused beds and retrofitting them to meet the needs of the local communities and NHS. And we'll do more of those this year, where we will put an existing bed in service because we would be retooling it to meet a need that we hadn't been meeting. So there's a lot of positives going on, and we take it a day at a time. And we'll be over there with our [MOR] with the U.K. this week. We'll be over there in 3 weeks to visit with them again and go over their MOR for February. So we're cautiously optimistic, and we take it a day at a time.

And next, we move on to Ryan Daniels with William Blair.

This is Nick Hiller in for Ryan Daniels. Just on the joint ventures in the U.S., do you have enough critical mass there where, I mean, they could start to service reference facilities, if you will? And is that stimulating maybe even more demand from novel partners?

Absolutely. We have enough facilities up and running that we use them as references to potential joint venture partners. And we've got 2 more of those coming online this year. At one end, here in Tennessee and Chattanooga with Erlanger medical center, and one in Ohio with the Mount Carmel facility. So yes, we do use our existing ones for references, and they are bringing new opportunities to us. And we have quite a few joint ventures that are in different stages of approval process and very optimistic that we will continue to execute here in our growth strategy.

And then just on the breakdown between price and volume in your 2018 U.S. guidance, could you give that also for the U.K. as well?

I can. We think mid-single digits for the total company for same facility revenue growth. We expect patient days to grow in the 4% to 6% range for the year once all these new beds get online, and we get the patients there. And we will have a, hopefully, a 2% rate increase here and overall in the U.S. And that will give us that 5% to 7% same-store revenue growth for the year. In the U.K., it will be just slightly less, that we do expect positive patient day growth in the 2%, 3% range. If we get our beds retooled over to the services that are needed and that the NHS continues to improve on the flow of patients there, and then we expect about a 1.5% rate increase for the U.K. So we expect their revenue -- same-store revenue to grow in the 4% to 6% range. So we feel good about both the U.K. and the U.S. and the beds we've got and the executions and the teams that we have in place.

We'll move on to Chris Rigg with Deutsche Bank.

Just wanted to follow up on that last question. So if you're going to get 4% to 6% same store in the U.K., can you sustain the margin at that level? Or will you still see margin pressure because of the labor dynamic?

Well, we will -- the labor dynamic will continue to put pressure on us. Now we expect margins to improve. That's our expectation, and that is our budget, so even in the U.K. and the U.S. Now it may only be 20 basis points of margin improvement, but we expect positive margin improvement in both countries. Now the labor cost is an issue, but for example, we spent less labor dollars in January than we did in December. So January was off to a good trend in how we're doing and working with reducing our agency costs. So if we can continue to build on that through the year, then we're there. We're there.

Got you. Great. And then just in terms of the -- I mean, you talked about the leverage and that being a focus. Acquisition-wise, do you expect to see a relatively similar pace in 2018 as you did in 2017, with the focus more on the organic and JV side?

It will be more on the organic and JV side. I'm not saying we wouldn't do an acquisition. If we want to do an -- if someone was to say, Joey, you can make one acquisition, and what would you buy? I would probably buy an acquisition that would help on the opiate treatment. We have about 115 facilities that do that. I would make an acquisition right there because of all the money the federal government is taking -- they're giving, the demand of these services. But if we don't do that, that's okay, too. We have plenty of growth through our bed builds and through the joint ventures. So we're in good shape for growing the company.

And next, we move on to Ralph Giacobbe with Citi.

Just wanted to ask a little bit about the 1Q guide. If I try to back into an EBITDA number, it looks like it would imply EBITDA sort of flat year-over-year. Not sure if there's something I'm missing in terms of a difficult comp or if you're seeing something early in the year that's maybe causing some of that pressure. And then what would drive sort of the ramp for the growth kind of into the back half of the year?

Ralph, this is Brent. You might recall, in the first quarter, the company has a reset of all of the employee-related taxes. And so we tend to have a much higher labor cost because of those employee-related taxes in the first quarter. And then also in the first quarter, as you heard in the remarks, we have 2 de novos that are open -- that have opened. And any time we open a de novo, there's some early losses. So that's going to weigh in more significantly on this year's first quarter. But then as the beds become -- the new beds become occupied, you see that ramp through the balance of the year. So that -- those are the primary components of the first quarter.

Okay, all right. That's helpful. And then you talked about some of the census pressure continuing in the U.K. But it seems like the referral stream is pretty positive. I mean, you had a big pop in admissions, but looked like there was more sort of a squeeze on length of stay. So just hoping you can kind of flesh out those dynamics. And if that's a phenomena that's going to continue sort of due to mix shift? Or what are the factors are at play as we think about that in '18?

The length of stay change was just really service mix or different length of stays for the different service mix. So there was nothing unusual there. We did go back and drill down there. Now the admission growth, we were glad to see that. If the NHS and the transition goes well, that could -- that should continue. And then we're doing things internally to also drive admissions to our facilities. And so we're positive about that, so there are patients that need our service. We have that documented, and that it's just a matter of getting them through the system, getting them approved for funding. And there's patients for us to have just working through the process.

And next, we'll hear from Kevin Fischbeck with Bank of America Merrill Lynch.

I want to go to the U.K. for a second. I guess, it sounds like some of the business lines are doing well there. But I guess, it was a little bit surprising that you're not looking to buy anything but you did buy something in the U.K. Can you just talk a little bit more about how comfortable you are with the asset mix that you have, whether there's anything that you really wouldn't want to keep investing in or potentially divest, some of those things in there that, if the right deal came along, you'd still be putting the money to work in?

Our education line of service is doing extremely well. And that acquisition, that small acquisition, was only 35, 36 beds. I think that we made -- have actually well. So if we were to acquire something, it would -- top priority would probably be to continue to expand the education services there. Now as far as selling something, with the Priory acquisition, we got a nursing home subsidiary and we -- that is something that we would sell for the right price, and something that we have -- that we're working on to see if there is a buyer out there for that asset. And if there is and the price is right and our board approves, we would divest the nursing home piece of business.

Okay, great. And I guess, last quarter, you mentioned a couple of things, like Puerto Rico being a drag on results. I mean, obviously, you had hurricanes and fire in California. Is there anything like that, a drag in Q4? Or how to think about any of those things being a drag into 2018?

There was a drag in Q4. We didn't mention it in the press release, but it hurt us 70 basis points on patient day growth. And those patient days would have flown -- flowed through and generated maybe $0.01 to $0.02 for us in the fourth quarter. But we're -- those natural disasters happen, and they did impact us. But they're behind us now, and -- but it did, for the fourth quarter, lower our growth on patient days 70 basis points. And those 70 basis points, those patients would have flowed through -- their revenue would have flowed through to the bottom line.

Great. And then just one clarification. You mentioned that labor costs, you expect it to go from 65% to 64%. Was that a U.K. labor cost number? Or is that a company labor cost number?

No. That's the U.K.

And next, we move on to John Ransom with Raymond James.

A couple of things for me here. What is the corporate overhead number going to be in '18 versus '17?

It's going to be up a little. And because of -- David, I'll let you answer the detail.

Sure, John. This is David. The U.S. corporate overhead projection for 2018 is around $90 million. And that does represent an increase from where we finished 2017, where we saw corporate office cost more like $70 million. And a lot of that is just bonus accrual related just for 2017, reflecting less than what would be the normal targeted annual bonus accrual amount. So our guidance does incorporate that, that would return to more of a normal level in 2018, and that would drive the corporate office cost to the $90 million level.

So that's a $20 million year-over-year change, by University of Georgia math. Secondly, what is the rate of labor inflation that you're embedding in your guidance in both U.K. and U.S.? And how does that compare to, say, a couple of years ago?

Say it one more time, John.

Not counting the improvement you'll make in agency, what is your overall labor inflation number for '18? And how does that compare to a year or 2 ago?

John, it's easy to compare it to previous years. It would have been in the 2% range that for the company we would've seen on the labor pressure. It's probably now approaching 3% for the company as a total. And there is isolated markets where operations have come to me and to Joy. We're out of market on our latest plan here, and we do need to do some sort of an adjustment. And most of the time, it's not across-the-board adjustment. It is a specific area inside the facility that would need some tweaking on their salaries that we would do. But it's pushing towards that 3% this year as compared to 2% for the past many years, but we still have a tight control. If you were to give more than 2%, there's an extra level of approval in the company that would occur. And any exception to the salary plan would be approved by me.

And then, David, what is built into the model for de novo losses? And are you going to break this out each quarter? I hope.

For the de novo losses, John, well, you could see the amount if you, roughly, if you look at the difference between our same facility and our total facility result that mostly represents. But as Brent mentioned earlier, with the timing of the new facilities, we do see the first quarter reflecting some losses there from the de novos. But then over the course of the year, as we see those facilities ramp up, for the full year, maybe about $1 million loss. But again, the timing of that would be -- the first quarter would reflect a greater loss with some kind of breakeven to slightly profitable results by the second half of the year.

John, let me help you. During the fourth quarter, we had a $1.8 million loss on the de novos. We had 3 de novos. In the first quarter, we have in our plan a $2.1 million loss.

I love it when you give numbers. And look, I'm sorry if I missed this. I was late getting in on the call. But the -- what is the bed add number, excluding de novos, U.S. and U.K.? So it's just kind of same facility adding 20 beds here, 30 beds there?

David is looking that up. We have that number, I think.

Yes, John, we had 750 bed additions in -- for the full year. And about 160 of those were the 2 de novo facilities.

Okay. And what was the plan for this year?

Now John, you didn't hear it in the beginning, you only get one question.

And next, we move on to Kevin Ellich with Craig-Hallum.

And I guess, we'll just follow up on John's question because I was going to ask it. Can you help us with the phasing of the 800 bed additions? Is that going to be spread evenly throughout the year? Or is it more weighted toward the back half?

No, we can help you with the -- our estimate as of...

And this is David. We do have more of a weighting towards the back half of the year as we look at the detail for 2018. So we have 150 or so in the first quarter, another 100 in the second quarter, with the remaining spaced somewhat evenly between the third and the fourth quarter.

That's helpful. And then, Joey, I think you made a comment to Kevin's question about a -- in Q4, there was a drag that hurt patient day growth by about 70 basis points. Was that weather-related? Or could you give us the detail as to what the cause...

It was the hurricanes on the East Coast, including Puerto Rico; and we had one facility that had to be evacuated in California because of the fires.

And next, we move to Ana Gupte with Leerink Partners.

Wanted to get an update on the acute care JVs? And what are you seeing in terms of their willingness to maybe reduce the capacity of their behavioral wards? And are they kind of giving you performance guarantees on volume or payer mix? Any of the conversations you're having or anything you've inked.

There's no guarantees in how many patient days they would be giving us. Now many of the joint ventures would close their psych units in their facilities and just use the new joint venture to treat all their patients. Occasionally, they want to keep a few psych med/surg beds for these psych patients that also has medical complications, and we get very comfortable with that. The main thing the joint venture partners are looking for is their being -- their emergency rooms have too many psych patients in them. And it's causing them staffing and risk issues that, quite frankly, they don't need. And that is something that a psych hospital can do. So we expect that their emergency room visits, and when they triage that psych patient, that, that psych patient would be using our freestanding joint venture. So that's the dynamics of the -- how the patients flow.

Okay. So it's not just Medicaid-heavy patient mix on -- in the ER on a Friday night or something. They will also send you...

It's all patients.

Okay. All patients. Can you comment on the pricing trends in the U.S.? You might have said this on the call. I'm sorry if I missed it. I was on another call earlier.

The pricing trends, Medicare is going to give us in that 1% to 2% range, we think, closer to 2% because there is a little inflation this year. The states, we saw some good increases there at the beginning of this year, and the expansion to the opiate service also brings revenue to us. So if I was to take an average, we want commercial to give us somewhere between 3% to 6%. Medicaid is going to be in that 2% range with Medicare. Overall, if we get a 2%, 3% rate increase overall revenue per day, we would be very pleased.

Okay, great. One final one, if I could. There was 2 dynamics going on with the short-term policies and the association health plans, which weakened essential health benefits quite a bit. On the other hand, all of the rhetoric around gun violence. I mean, how do you -- what kind of conversations are you having on potentially additional funding around mental health maybe that might be offsetting some of the other actions the Trump administration has taken to weaken essential health benefits. But they have a lot of pressure on the gun violence issue.

We are very active working with some key senators and members of the house on protecting and expanding psychiatric benefits. And so it's just beginning, but we've had very positive conversations. I was there about 3 weeks ago meeting with these individuals and very positive, very receptive. Now no one wants to happen what happened in Florida, so I really don't comment on that very much. But it is a -- obviously, it's a sign that there's mental health issues that are not being addressed or getting through the system that should get -- that we should be catching. And anything we can do to assist any state or the federal government on where our thoughts are on this, we have open communications with the key committees and the key senators and congressmen on that issue.

And we'll now move to our final question, Gary Taylor with JPMorgan.

Just one clarification. First, on the 4% to 6% same-store revenue growth expectation in U.K., that's constant currency number, correct?

Yes.

Okay. Did I miss -- I missed just maybe the first 5 minutes, so I don't think I missed. Did you talk about CapEx maintenance and growth CapEx for '18?

Gary, we didn't. We are projecting that maintenance CapEx would continue at historical levels, which is around 2% of our revenue. And then we do see our expansion CapEx opportunities for 2018, just with the number of new facilities and beds, being somewhere between $300 million to $350 million.

And then my last one, just coming back to the U.K. length of stay, and I know you talked about service mix, so I just want to understand -- make sure I'm understanding that correctly. When we look at that U.K. length of stay, first quarter was down about 35 days, 2Q was flat, 3Q was flat, 4Q is down about 24 days. So I'm just trying to understand if there's some seasonality to the service mix. Or if this weaker length of stay in the fourth quarter implies that the behavioral business was actually much weaker than the third quarter, and then education and health care, just more than filled the gap? So it just seems like really sizable swings that I don't feel like I understand it well.

Well, Gary, I've got some people looking for some more detail. We do have the detail. We may have to give that to you off the line. But we have 6 very distinct programs in the U.K., which is very different than here in the U.S. In the U.S., the length of stay is usually around what is the payer's length of stay. The length of stay in the U.K. is around the service line length of stay. So if we had more patients in the acute part of the business, they have a 2-week length of stay; versus if you were in the forensic piece of our business, you could have 1 to 3 years. So it doesn't take many patients moving around in those service lines to impact the length of stay. And so we will have times when it will move more than someone would think it would move. And then we will have times where it stays very consistent. But admissions and discharges are so much smaller over there. They have more of an influence on the length of stay number than we have here in the U.S. So many times, I think people try to compare that piece to the U.S., but it's different in that it's not a payer length of stay. It is a specific service length of stay. Like a eating disorder in the U.K., a patient there could stay 3 to 6 months. So if you had more of one of the other or if we retrofitted a facility and brought back -- or brought a new eating disorder program, that could drive the length of stay one way. Or if we added acute beds, that could take the length of stay another way. The main thing is that we internally look at that and analyze that to see if there is anything unusual or -- going on there. But we're very comfortable with the length of stay, and that the service lines explain the change.

Okay. I appreciate that. Yes, I certainly understand the various length of stays by those service lines. And maybe I'm just not appreciating how just a few patients might move these consolidated numbers more than one might first imagine, so I appreciate that. Maybe I'll follow up a little bit and just try to understand that makes the business a little better. But I appreciate it.

And that will conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Jacobs for any additional or closing remarks.

Well, thank you, operator. I want to thank the team in the field, our Acadia team here in the U.S. and in the U.K. Great job, great fourth quarter. We had some obstacles to overcome, and you all did a great job and positioned us to make our 2018 numbers. And I am very, very appreciative and more appreciative of the care you give to our patients and their families, that we are making a difference, we are improving their lives. And we never thank you all enough. We're also, in the U.K., very grateful to have a partner like NHS, that works with our teams. And we have that open line of communication, both on patients coming into the system and the care being delivered in the system. So we're very appreciative of that. I will be out visiting some facilities in the next 60 days and over to the U.K., so I'm looking forward to that travel. So once again, thank you all for a great fourth quarter. And we'll talk to you after the first quarter.

And that will conclude today's call. We thank you for your participation.