Earnings Call Transcript - ACHC Q3 2021

Gretchen Hommrich, Director of Investor Relations

Good morning, and welcome to Acadia's Third Quarter 2021 Conference Call. I'm Gretchen Hommrich, Director of Investor Relations for Acadia. I'll first provide you with our safe harbor before turning the call over to Chief Executive, Debbie Osteen. To the extent any non-GAAP financial measure is discussed in today's call, you will find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP on site 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 2021 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 third 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.

Debbie Osteen, CEO

Good morning, and thank you for being with us today for our third quarter 2021 conference call. I'm here today with Chief Financial Officer, David Duckworth; and other members of our executive management team. David and I will provide some remarks about our financial and operating results for the third quarter of 2021 and our guidance for 2021. Following our comments, we will open the line for your questions. We continue to see favorable momentum in our business in 2021 as Acadia delivered a solid financial and operating performance. Demand for our behavioral health services has remained strong, especially within our acute and specialty service lines. For the third quarter of 2021, our same-facility revenue increased 7.9% compared with the third quarter of 2020, including a 5.6% increase in revenue per patient day and a 2.2% increase in patient day. We are pleased to see these solid volume trends, especially under challenging conditions we experienced in certain markets in the third quarter, which include Hurricane Ida and the surge of the Delta variant of COVID. We are extremely proud of our exceptional team of dedicated employees and clinicians across our operations who continue to support our patients with the highest level of care under extraordinary conditions. Above all, the safety of our patients is our top priority, and we remain focused on providing consistent care for those seeking treatment for mental health and substance use issues. Our financial results for the third quarter were adversely affected by disruptions from Hurricane Ida in Louisiana. We had an acute facility sustain damage from the hurricane, and the majority of patients had to be evacuated. As the damage to the facility is repaired, we are gradually opening units. With three units currently open, the census has started to ramp up. We expect the remaining 2 units to reopen over the course of the fourth quarter. Additionally, we had another facility located in Louisiana that experienced a brief temporary impact to their admissions. In total, the hurricane had a negative 0.3% impact on our revenue growth rate and a $0.01 impact on adjusted EPS. In addition, our facilities in certain markets saw an elevated level of COVID-19 cases during the third quarter. We continue to see the vast majority of our facilities managed through the COVID wave, using the protocols that we have had in place since 2020 with minimal disruption to patient volumes or operations. We are pleased that in all cases, COVID-related factors have proven to be temporary. Despite these challenges, we continue to manage our operations safely and efficiently while providing essential behavioral health treatment and maintaining our same high standards of patient care. The past 18 months have been, for many, the most difficult of their lives as we continue to deal with a global pandemic. The stress and anxiety related to the pandemic had a profound effect on many individuals, especially those already struggling with mental health issues and substance use disorders. We've been fortunate to see the extraordinary efforts of Acadia's mental health clinicians, physicians, nurses, and staff, who have continued to help the patients who come to us for help and not allow COVID to disrupt the critical care our patients needed. At the same time, on a positive note, we are pleased to see issues surrounding mental health gaining more attention in the national spotlight. Many top professional athletes, corporate leaders, and other social influencers have come forward to share their personal struggles and reduce the stigma around mental illness. As a result, we are seeing higher demand and societal acceptance of behavioral health, increases with a greater push for access to treatment and expanded coverage options for those who seek treatment. Acadia is well positioned to meet the needs of those seeking behavioral treatment through our diversified service lines and proven operating model. On our previous investor calls, we have shared Acadia's growth strategy that is centered around four distinct pathways that we believe will provide additional opportunities for Acadia to reach more patients in new and existing markets. Throughout 2021, we have made significant progress in executing on this strategy. We have continued to make the right investments in initiatives across our service lines to support sustained long-term growth. During the third quarter, we added 104 beds to our operations, bringing our total to 282 bed additions to existing facilities this year. We believe facility expansions offer the highest return on investment for Acadia. And we expect to meet our goal of adding approximately 300 beds to facilities by the end of the year. We also opened 2 new comprehensive treatment centers in the third quarter located in Tennessee and Florida. CTCs are designed to address the growing and critical need for addiction treatment, especially for patients dealing with opioid use disorder. Through the end of the third quarter, we have opened 5 CTCs and expect to open 6 additional CTCs in underserved markets by the end of 2021. Throughout the country, health systems are looking to integrate care and expand treatment options to meet the growing demand. By partnering with hospitals and health systems across the country through joint ventures, we are able to integrate physical and mental health services to develop innovative quality programs. We are proud of our 13 joint venture partnerships across the country. Acadia has a strong track record of successfully operating the 7 joint venture facilities that have opened over the past few years. We are also excited about the opportunities to expand our reach into more communities or grow ground on new facilities with 2 JV partners, Geisinger and Lutheran Health Network of Indiana during the third quarter. We also continue to identify attractive acquisition opportunities that fit our profile and extend our market reach, providing another important pathway to growth. We believe that the fragmented behavioral health care industry offers additional prospects for future acquisitions, and we are well positioned with sufficient capital to pursue these opportunities. Our success to date in 2021 confirms the strength of our operating model and our ability to execute our strategy. Looking ahead, we will continue to expand our network and serve more patients through our four distinct pathways for growth. We recently announced 2 key additions to our management team, who will each play an important role in the execution of our growth strategy. David Keys has been named Chief Development Officer, bringing nearly 2 decades of experience in the healthcare services market and will focus on mergers and acquisitions and de novo development. Osei Mevs has been named Vice President of Government Relations, and will oversee our government relations and public policy functions and strategies. His extensive experience in government relations and public policy and deep understanding of the healthcare industry will support our efforts to further educate policymakers and expand governmental support and funding. We welcome David and Osei to Acadia, and we look forward to working together in our shared mission to raise awareness about mental health and extend our market reach to more patients and families in the communities we serve. We are encouraged by the favorable trends in our business and believe we are well positioned to capitalize on the expected growth in demand for behavioral health services. As with many other healthcare providers and other industries across the country, we are currently dealing with a tight labor market. However, we believe the diversity of our markets and service lines and our proactive focus helps us manage through this environment. Generally, the challenges that we have faced are temporary and market specific; we remain focused on ensuring that we have the level of staff to meet the demand in our markets across our 40 states. As always, our primary mission is to meet this demand and support the patients and communities we serve. We will continue to focus on providing the highest quality of patient care while extending our market reach and advancing our position as a leading behavioral healthcare provider. Now, I will turn the call over to David Duckworth to discuss our financial results in more detail.

David Duckworth, CFO

Thanks, Debbie, and good morning. Revenue for the third quarter was $587.6 million, compared with $548 million for the third quarter of 2020. Acadia's adjusted EBITDA for the third quarter of 2021 increased to $141.9 million compared with $116 million for the same period last year. Results for the third quarter of last year included a reversal of $18.1 million of income related to the provider relief fund established by the CARES Act. For the third quarter of 2021, adjusted income attributable to Acadia stockholders per diluted share was $0.72. For the current and prior year periods presented in our earnings release, adjusted income excludes transaction-related expenses, debt extinguishment costs, loss on impairment and the income tax effect of these adjustments to income. Strengthening our financial position and reducing our debt have been top priorities for Acadia in 2021. Our balance sheet remains strong with ample liquidity and capital to support our growth strategy. In the third quarter, we repaid $25 million on our senior secured revolving credit facility, reducing the outstanding revolver balance to $100 million as of September 30, 2021. The company had $500 million available under its $600 million revolving credit facility as of September 30. Our net leverage ratio was approximately 2.2x at the end of the third quarter, and our cash balance was $196.3 million. During the third quarter, we continued repayment of amounts received under the CARES Act and repaid $10 million of Medicare advanced payments after having paid $7 million in the second quarter. We will continue to repay the remaining balance on a monthly basis through September of 2022. Also, in the third quarter of 2021, the company repaid half of the approximately $39 million of 2020 payroll tax deferrals, with the remaining portion to be paid in 2022. Now, turning to our guidance based on our third quarter results and fourth quarter expectations, we have narrowed our 2021 financial guidance to the following ranges, which are within our previously announced ranges. Revenue now in a range of $2.295 billion to $2.315 billion; adjusted EBITDA now in a range of $537 million to $547 million; adjusted earnings per diluted share now in a range of $2.51 to $2.59, which reflects a revised estimate of stock compensation for the fourth quarter of 2021 in a range of $11 million to $13 million; operating cash flows now in a range of $290 million to $325 million; and total capital expenditures in a range of $210 million to $230 million, which includes approximately $45 million for maintenance capital expenditures. As a reminder, this guidance does not include discontinued operations or the impact of any future acquisitions, divestitures, or transaction-related expenses. I will now turn it back to Debbie for some additional comments.

Debbie Osteen, CEO

Thank you, David. As we announced earlier this month, I plan to retire as CEO of Acadia while remaining on the Board of Directors. I look forward to continuing my involvement with Acadia and supporting Acadia's growth in the coming years. I am extremely proud of what we have accomplished since I joined Acadia. The past 3 years have provided me with a unique opportunity to leverage my experience in behavioral health to lead Acadia through a critical period. Most importantly, I am proud of the team at Acadia and all our employees who demonstrate their commitment every day by helping the many people who need quality behavioral healthcare. With the help of the national recruiting firm, the Board of Directors, and I are actively working to identify the right person to lead Acadia in 2022 and beyond. This person will be joining a company that has a very talented and experienced leadership team. The company has a strong balance sheet and robust pipelines that allow us to pursue many growth opportunities. Acadia is well positioned to continue executing our growth strategy and solidifying our position as the largest stand-alone behavioral healthcare company in the U.S. With that, Jason, we are ready to open the call for questions.

Brian Tanquilut, Analyst

Debbie, congrats on the upcoming retirement and thank you for all the help over the years, and also congrats on the good quarter. I guess my first question, everyone's been wondering about labor and you hit on it a little bit in your prepared remarks. But just wondering if there's anything you can share with us in terms of maybe some metrics internally on labor for you guys and maybe your thoughts on what differentiates Acadia from some of your peers or competitors in terms of the bigger challenges, it seems, that they're seeing?

Debbie Osteen, CEO

As we examine our markets and services, we recognize our uniqueness. This differentiation benefits our labor management. We've maintained a strong focus on recruitment since I joined the company, not just due to the impacts of COVID. Our approach to labor is tailored to each market, and while we face challenges, we remain proactive in staying competitive. Our corporate recruiting team has been effective in filling positions, and we have expanded our resources. Together with local recruitment and retention efforts, we have successfully navigated hiring throughout the challenges posed by the COVID resurgence in the third quarter. Our geographic positioning and hands-on approach in addressing issues, such as supporting nurses who may need time off, have been crucial. Our salaries, wages, and benefits as a percentage were 51.1%, slightly decreased. Our results demonstrate our effective management, with targeted pay strategies and support from our centralized team to assist facilities in navigating their unique market conditions. Well, I think that as we brought on David Keys, we believe that there is still a lot of opportunity that it is still a very fragmented market. We see a number of smaller multifactility systems and a number of single-facility operators that present future opportunities. His focus will be looking at those opportunities, finding what fits our framework here and what would be strategic for us and also then meet the financial framework. At the same time, David will be helping with our de novo builds, which we still think has a lot of opportunities. We think there are a number of underserved markets. So he’s going to help advance that and support those efforts. As providers have gone through, certainly in the behavioral health part of the industry, they may want to seek alternatives to owning. So we are poised to take advantage of that, looking for opportunities to improve operations, but also to have bed additions. That’s how we've grown in the past through various acquisitions that Acadia has done. He’s going to be very busy and has already been, I think, well received by the team here, and we look forward to what he can do for Acadia in the future.

A.J. Rice, Analyst

Hi, everybody. Let me also offer my best wishes, Debbie, you had a great run there. Maybe just first to ask the revenue per patient day number was strong. I know the second quarter may have been a tough comparison versus last year, but I'm thinking the third quarter was probably more normalized a year ago. Can you just comment on what you're seeing with respect to rates? Any change in managed care? Do you think this was more of a mix thing in terms of why it was so strong? And what about the sustainability of it?

Debbie Osteen, CEO

Well, I'll take part of it and then I'll let David talk a little bit. But I do think that we did see strong payer rate increases. We've been focused on that for the last 1.5 years. We also had a strong payer mix and a positive service mix. So as we think about that, we look at our specialty volumes, and the strength that we've seen and really, frankly, the strong demand there, we generally have a higher mix of commercial payers for our specialty facilities. When our volumes are strong and acute, which they have been in these larger specialty facilities, that strengthens the revenue per day. We do think that is sustainable going forward. We think the demand for our services, both in acute and specialty, are really stronger than ever. They were strong before COVID but now even stronger. As we look at it, we see the rate increases coming in at the higher end of where our projections have been. But we are also working very hard to ensure we have specialized services, and I think our payers have recognized that and our outcomes. They've been willing to offer higher payer increases than normally we’ve seen.

David Duckworth, CFO

As Debbie mentioned, we do believe that revenue per day is sustainable going forward. That is reflected in our outlook for the fourth quarter and our updated guidance. We do believe that the service mix will continue to contribute to that revenue per day growth. We've seen rate increase from payers that has been at or above the high end of our expected range. There’s also a component of service mix that we believe will continue. We did see acute and specialty recover very strong in the third quarter compared to last year, but the service mix this third quarter compared to last year is even stronger with acute and specialty really performing well.

A.J. Rice, Analyst

Interesting. Let me just ask as my follow-up about what you’re seeing as you work with acute care hospitals. I know they’re an important referral source for you but often have site units that compete with you. Was there anything about the surge that they were trying to free up space potentially in their site units that may have helped you or in the referral pattern of patients showing up in the ER? And I wondered also whether the dynamics around COVID have changed in any way your discussions with them about joint ventures and whether there’s enthusiasm or it’s taking longer, what would you say about that?

Debbie Osteen, CEO

Well, I don't think we've noticed any real change in the referral patterns from our Med-Surg hospitals. We have had very steady referrals from the ERs, which really started a year ago in June after the height of the pandemic. We've been very focused here on responsiveness because we know it’s important to ERs that their patients get to these hospitals for care in a timely way. That’s been helpful to our ER referrals and been very steady. Regarding joint ventures, we've had a very active pipeline of partnerships that have not slowed down but actually accelerated. I was surprised by that, but I do think they see that they want to focus on other service areas within the Med-Surg systems. We do have a strong track record and they are reaching out to us. It’s a competitive process, and we’re pleased they are choosing Acadia. We hope to be making a few announcements coming up in the fourth quarter. These will be strong partnerships that again we’re proud of, and they will continue, and likely accelerate as we move forward.

Pito Chickering, Analyst

A few questions for you on labor and a follow-up. Can you give us any color on turnover what you saw sort of during third quarter and fourth quarter? Any color on what wage inflation is running these days for our full-time employees? And as you open up new beds, are you able to recruit quickly to fill those beds?

David Duckworth, CFO

Yes, Pito, we have seen stability in our turnover. Looking back over several years, we have not seen a significant change there. In terms of wage inflation, we continue to take a proactive approach around our wages and pay. It is a market-specific analysis that we go through, a job-specific analysis that’s focused on the appropriate rate increases across different jobs. The average we have seen as a company tends to be around 3%, but it can vary depending on our strategies across different markets. Recently, premium pay has been stable for us, in line with historical averages; agency labor still is around 2% of our total labor. We have not faced a significant impact there. Regarding recruiting, our teams continue to do a great job staffing existing facilities. As we approach a new market, we hire the CEO in advance and plan for the resources we need for significant growth projects. We have a strong track record of recruiting the staff we need as we open and ramp up a new facility. Pito, we don’t really report at a service line level of detail. We run our services geographically and across our groups, and we do provide some information by service line included in our filings. More detailed metrics are just provided for our total U.S. operations. I’ll say those specialty facilities have performed very well over the past 12 months. While the revenue per day dynamics can differ even within specialty, it depends on the market and many other factors, but they have performed well over the course of the last year. The occupancy has been stable, tended to be in the 75% to 80% range on average. That’s another metric that can depend on the programs, but that’s the average for our specialty facilities.

Debbie Osteen, CEO

I’ll just say, Pito, that we started to see our larger specialty facilities returning care. As you know, we pull from all areas of the U.S. They’re very specialized programs, and many do travel to us. In the first quarter, we saw that return throughout the Delta variant wave. We still have individuals seeking care; they are traveling, and that has supported our larger, more specialized facilities.

Pito Chickering, Analyst

Okay. Just to sneak in one follow-up for A.J.'s question. If we take the long view here, do you think that the supply-demand imbalance for behavioral beds is accelerating? Would you be modeling the high end of managed care pricing four years until either demand slows or supply increases?

David Duckworth, CFO

We certainly believe there are strong underlying factors that support our volume growth expectations. You mentioned demand; we also think with the reduced stigma, there are more people pursuing treatment and have better insurance coverage for that treatment. There are positive dynamics influencing that. We do think that could be a factor in the rate increases that we’re seeing. When you mention managed care, we do have a diversified payer mix that factors into how we model rate growth. We see rate growth above the high end of our expected range, so we think that will continue going forward, coupled with positive dynamics.

Andrew Mok, Analyst

And I’ll echo congratulations on your retirement, Debbie. The revised guidance implies remarkably steady results from Q2 to Q4, about $140 million per quarter of EBITDA. Can you talk to the underlying variability in the portfolio either by service line or geography? Are results by market as consistent as they appear on a consolidated basis, or does the diversification mask that underlying variability?

David Duckworth, CFO

The results are fairly consistent from one month and quarter to another. We do not see a significant amount of seasonality in the U.S. business. I think as we think about the third quarter to the fourth quarter, there is some seasonality around the end-of-year holidays, primarily around our specialty business and, to some degree, our acute business. That’s typically for a short period, and we talk about that for the fourth quarter and the beginning of the first quarter. Other than that, we see consistency in execution. I’ve been really pleased by the trends around reimbursement, cost management, and our occupancy being consistent throughout this year.

Andrew Mok, Analyst

Got it. And just a follow-up here on CapEx. It looks like your full-year CapEx number was reduced by $85 million from what you had targeted at the beginning of the year. What’s driving the cut to CapEx there? Are there any postponements in capital investment projects?

David Duckworth, CFO

Yes, Andrew, when we established our initial guidance for the year, we made some assumptions around joint ventures in our pipeline and the timing of breaking ground. We had a conservative estimate around CapEx stepping up over the second half of 2021, and that projection for that would have a step-up occurring right at the end of this year. We mentioned that we recently broke ground on 2 joint ventures. We’re very excited about how the pipeline will play out and feed into the construction timeline for various projects. There was a delay and a change in timing of that step-up, and our revised guidance reflects that; it will now happen at the end of the year or the beginning of next year. We’ll provide more data around that in our next quarter’s report.

Debbie Osteen, CEO

They’re not projects that we decided not to pursue or that didn’t work as expected. It’s really more around just getting to the point of breaking ground. Some of that has to do with the pace of construction; there are issues out there right now for construction. Our design and construction team is really pushing to move quickly. We have the demand and want to get the beds online.

Kevin Fischbeck, Analyst

So I guess you guys have really been underscoring how focused you are on being able to meet the demand in your communities, which suggests you'd be willing to eat into margins to afford labor if necessary, although year-to-date prints suggest that you haven’t needed to. Are you seeing less wage inflation and fewer supply shortages, maybe among like therapists, mental health techs, and substance use staff compared to the nurse population? Do you think that can be part of the driver of some of your lower exposure to labor cost inflation?

Debbie Osteen, CEO

I do think our service lines indicate that the need and expertise we’re looking for are different across service lines. It won’t be easy for any of the workers, but I think it changes our recruiting focus. We have found we’re able to meet our needs and recruit those workers successfully, even with the competition. Retention is another part we’re focused on but varies by facility. We’re ensuring we have all the pieces in place to meet demand, which can vary by location, and we have visibility through our local leadership to avoid any disruptions for treatment.

Kevin Fischbeck, Analyst

Okay. That’s helpful. And then I guess just a quick follow-up. You mentioned in your prepared remarks that a few of the markets did see the COVID pressures. Can you call out which markets those were?

Debbie Osteen, CEO

It really varied. We started seeing more pressure towards the end of August and into September. It was in different parts of the country. We had some pressures in the South initially, and if you follow the COVID data for the country, our facilities experienced some of that. We’ve taken a very focused approach to make sure that when someone presents to our hospital, we are able to care for them. We test and isolate as necessary, and I think our team has really focused on ensuring that we treat that essential mental health condition while providing a safe environment. Many of our markets have seen a decline as we’ve gone into late September and October for the Delta variant. We still have a few that have positive patients who are being managed very well by the staff. We’ve taken a hands-on approach where our Corporate Medical Director, Chief Compliance Officer, and Nursing Officer help manage daily, which makes a difference as facilities feel supported.

Whit Mayo, Analyst

Just a couple of quick ones here. David, how are the start-up costs tracking versus your plan this year? And maybe just remind us what the expectations are for de novo activity in ‘22?

David Duckworth, CFO

We are tracking to incur about $10 million for the year. We’ve already had around $7.5 million through nine months of the year. We have a couple of facilities going through the start-up process now. As we look ahead, we expect next year to have 4 new inpatient facilities coming online, 3 joint ventures and de novos, along with a number of CTC de novos for next year. We talked about this year having CTC de novo opportunities, and we expect next year to look similar regarding the investment and start-up losses. We’ll go through our budgeting process for next year and really look at the timing of opening those facilities for more precision on next year’s investments.

Whit Mayo, Analyst

No, that’s helpful. And on non-labor-related questions, Debbie, regarding initiatives focused on supplies and procurement, just an update on the $20 million target, and how you're tracking. Any surprises, good or bad? Do you feel there are any opportunities going forward from conversations?

Debbie Osteen, CEO

The team did an outstanding job last year to achieve that $20 million performance improvement goal. By the end of that year, we were where we wanted to be. This year, I think we’ve continued to identify further opportunities. We have a dedicated team focused on getting better contract terms and improving compliance with our GPO in the field. We have quarterly meetings to evaluate progress and identify opportunities. I think there are more opportunities that we can address efficiently. We’re looking for ways to improve our contracting configurations and ensuring field teams are responding positively to our initiatives. We are prepared for some inflation in areas like food and other costs, which has benefited us given our initiatives already in place.

Frank Morgan, Analyst

I’m going to go back to labor one last time. Within your segments, are there any particular areas where it’s been more difficult to recruit, if you think across the service lines. Any specific area called out as being more challenging?

Debbie Osteen, CEO

As I think about our recruiting efforts, we focus on end and mental health team roles. There’s a cross-industry focus on those positions and we must make sure to fill them, and we’re doing that with a lot of retention effort around RNs, mental health techs, and therapists; which varies by facility. We’re just trying to ensure that everything pieces together to meet demand. Speaking of the areas, it's going to vary by facility on whether it's a therapist or RNs, so I can’t name a specific one, but we have a lot of visibility on these metrics and how they relate to staffing. The sequestration, as structured now, would be the only reimbursement item to highlight. There are no other items we’ve flagged throughout 2021 that would be one-time occurrences. The sequestration impacts Medicare, which accounts for about 16% of our revenue applied to the traditional Medicare, around 60% to 70% of our total Medicare.

Frank Morgan, Analyst

Maybe just one quick follow-up. When you used the term retention quite a bit, is that anything more than just paying higher wages to people? Is there anything else going on?

Debbie Osteen, CEO

I think wages are important, and certainly that's a focus to remain competitive. We think about why people stay at an organization, and we’re emphasizing onboarding our staff, making sure they're trained and want to remain with us. Flexibility is crucial for RNs and career advancement for mental health techs. Value recognition plays a key role in retention as well. While wages are crucial, our strategies extend to elements on why individuals choose to stay with us.

Sarah James, Analyst

So just trying to put some of the pieces together here. You talked about managed care rates being above the high end. While wage inflation is holding steady at 3%, and agency labor around 2%. Am I putting those pieces together correctly, does it sound like a potential margin expansion opportunity?

David Duckworth, CFO

Sarah, we talked about rate increases being above the high end of our range, which is 2% to 4%. The revenue per day reflects other factors beyond just pricing increases from payers, affected by service mix and payer mix. Wage inflation we think is similar to those rate increases but might be slightly higher given the prevalence of premium pay. So we might be higher than 3% average, even though the base would align with that average. Rate increases driving revenue per day growth would be similar to wage inflation. As we look back, we have not seen any significant changes comparing periods prior to the pandemic or throughout; other than in certain markets with temporary challenges. We have stability in turnover rates, and maintaining that metric is essential for us considering the pressures on everyone involved in patient care.

Debbie Osteen, CEO

I think the stability in turnover is commendable. We monitor this metric as it's crucial for facility operations. Despite the environment we’re in, turnover rates remain stable, reflecting the efforts of local operators.

Operator, Operator

There are no more questions in the queue. This concludes our question-and-answer session. I'd like to turn the call over to Debbie Osteen for any closing remarks.

Debbie Osteen, CEO

Thanks again for being with us today and for your interest in Acadia Healthcare. I would like to conclude by thanking all of our employees and our clinicians for their dedication and focus on providing the highest quality care to our patients and their families. They’ve done this under extraordinary circumstances and we appreciate all of these efforts. If you have additional questions today, please do not hesitate to contact us directly. Have a good day.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.