Acadia Healthcare Permitted to Build Psych Hospital in St. Augustine Despite Federal Investigation

Embattled Acadia Healthcare issued permit to build a facility in Florida despite ongoing legal problems including yet another Federal Investigation into admissions, length of stay and billing practices announced 1 day after paying $19.85M for knowingly billing for medically unnecessary patient services or services that didnt' meet federal, state regulations

reeve B. Waud, Founder, Chairman of Acadia's BoardPhoto byScreen Capture/Youtube Video [Creator]

CHICAGO — Acadia Healthcare, a major operator of psychiatric hospitals across the United States, continues its expansion despite facing ongoing legal challenges and a sharp decline in stock value. The healthcare company has received approval to build a new 144-bed behavioral health facility in St. Augustine, Florida, even as federal investigations probe its business practices.

Acadia, which operates several psychiatric hospitals in the Midwest, including seven in Illinois, plans to construct the two-story, 99,485-square-foot hospital on a 6-acre site near Interstate 95 and County Road 210. The project, estimated to cost $1.3 million for the hospital’s foundation alone, was granted a permit by St. Johns County on September 9. The new facility will include parking and stormwater infrastructure controlled by two stormwater ponds, according to local planning documents.

However, it’s also been announced that Acadia Healthcare is again the subject of a Federal Investigation into their admissions, length of stay and billing practices. This investigation comes after a report from early Sept. which stated that the company allegedly kept patients in its facilities longer than medically necessary to maximize insurance payouts, raising ethical and legal concerns.

The investigation, which involves interviews with dozens of patients, family members, and former Acadia executives, has painted a troubling picture of the company’s practices. The report indicated that Acadia was detaining patients without medical justification in several of the 19 states where it operates. In some cases, patients were allegedly held for financial reasons rather than medical necessity.

Acadia responded to the allegations by stating that the experiences described in the report were “completely inconsistent with Acadia’s policies and protocols.” However, the company’s stock reacted swiftly to the news, plunging 24.6% during morning trading, marking the largest one-day drop since 2017.

Add to Acadia's legal woes, the company has also received a “voluntary request for information” from the U.S. Attorney’s Office for the Southern District of New York. The company expects similar inquiries from the SEC as investigations progress. These legal pressures have put Acadia under the spotlight as federal agencies review its practices for potential violations of federal health regulations.

Just one day before these federal actions, Acadia agreed to a $19.5 million settlement with the U.S. Department of Justice over allegations of fraudulent billing practices. The settlement stems from accusations that the company improperly billed federal healthcare programs, including Medicaid, for services that were either unnecessary or not provided at all. The settlement will be disbursed between federal and state entities, further underscoring the significant legal challenges Acadia is currently facing.

Following the settlement and news of the investigations, Acadia’s stock dropped more than 20%. Since the start of the year, the company’s stock has shed 26.6% of its value, in stark contrast to broader market gains. The Health Care Select Sector SPDR ETF, for example, has risen by 12.5%, while the S&P 500 index is up by 20.6%.

The fallout from these legal and financial challenges has attracted attention from shareholder rights law firm Hagens Berman. The firm has launched its own investigation into Acadia, focusing on potential securities fraud. Reed Kathrein, a partner at Hagens Berman, stated, “We are investigating whether Acadia may have misled investors about the reasons for its revenue growth and the legality of its revenue recognition practices.”

Acadia’s current legal issues are not isolated incidents. The company has a long history of legal challenges, including a high-profile lawsuit in 2019 involving its foster care operations. In that case, Acadia was sued for placing an eight-year-old girl in the care of a known sexual abuser, leading to repeated assaults. The lawsuit highlighted broader concerns within Acadia’s foster care operations, including inadequate oversight and staffing. The jury awarded the victim $485 million in damages.

In 2024, a Senate Finance Committee report further detailed widespread problems within Acadia’s residential treatment facilities for children. The two-year investigation uncovered numerous cases of physical and sexual abuse, improper use of restraints, and civil rights violations at Acadia-operated centers. These revelations have only increased the pressure on the company as it faces growing scrutiny from both federal regulators and lawmakers.

Despite these ongoing challenges, Acadia continues to expand its operations. In addition to the St. Augustine facility, the company is building another 144-bed behavioral health hospital in Greenville, North Carolina. These developments come as Acadia works to maintain its presence in the behavioral health market, even as its legal and financial troubles mount.

Acadia Healthcare currently operates 258 behavioral health facilities across 38 states and Puerto Rico. The company serves approximately 75,000 patients daily with a workforce of over 23,500 employees. However, with federal investigations intensifying and legal challenges continuing to emerge, the future of Acadia’s business model remains uncertain.