Killing Them Softly
An Article Submitted to The Chicago Tribune on November 3, 2018, but never published. The Tribune published its own story on March 6, 2019.
By Penn Little | A Contributor for Forbes, and SeekingAlpha.com, Penn is an entrepreneur, freelance finance writer, as well as investigative journalist. He lives in Chicago, IL.
What if… tomorrow morning, Governor Bruce Rauner, upon a tip from a concerned group of citizens, directed DASA to shut down the Timberline Knolls Behavioral Health Treatment Facility in Lemont? What if Governor Rauner dismissed financier Reeve Waud from his position as Chair of the State Police Merit Board? What if this information also prompted him to notify other state leaders such as Governor Brian Sandoval (R-NV) and Governor Mary Fallin (R-OK) of similar problems with facilities owned by the same company as Timberline Knolls: Acadia Healthcare Company, Inc. (Nasdaq: ACHC)?
Those are big “What ifs…” Would they win re-election for Governor Rauner? Potentially, yes.
How are all of these connected? They all involve corruption within the largest company fighting a national epidemic.
In 2005, a Chicago-based private equity fund called Waud Capital Partners founded Acadia Healthcare, Inc. On December 15, 2011, the company held their initial public offering on the NASDAQ.
When it went public, Acadia owned just over a dozen healthcare centers. Since then, the company has aggressively grown, mostly using debt, acquiring over 550 behavioral healthcare centers. The company is now the largest provider of opioid addiction treatment services in the world, and it appears to be financially starved.
Just last week, a New York City-based short seller exposed how massive budget cuts at Acadia have led to what appears to be widespread neglect, abuse, and poor quality of care at Acadia’s centers.
The allegations occur in the majority of the 39 states in which Acadia operates. This includes Timberline Knolls in Lemont, the eating disorder treatment facility for which Waud’s company paid $90 million for in 2012. Two lawsuits have been filed against the facility this year. One complaint alleges wrongful death due to neglect of patient Grace Cho. The other alleges sexual assault by Michael Jacksa, 40, a former counselor at the facility. Another suit, from 2015, alleges child neglect.
Amidst declining revenues from subsidy cuts, the extraction of the individual mandate, and rampant abuse of 2008’s Mental Health Parity and Addiction Equity Act, revenues are just harder to come by. Obviously, there’s no proven cost-effective solution, and treatment is broadly defined, despite a fully funded mandate. From 2011–2015, the industry was a cesspool of fraud and abuse, and anyone could get paid.
Waud Capital Partners, the founder of Acadia, is the product of Lake Forest’s own Reeve Byron Waud. Waud, 55, is no stranger to high finance. Mr. Waud is a notable GOP donor. Aside from a $26,000 allotment to Rahm Emanuel, he has predominantly parked on the right side of the aisle. He has hosted fundraisers for national campaigns.
He has also been serving on the boards of the Economic Club of Chicago, as well as St. Paul’s School in New Hampshire. Waud even worked for the Governor’s company, Golder, Thoma, Cressey, Rauner, Inc. However, one group that played a role in seeding Waud’s current ventures, when he opened his firm in the 1990s, was The Pritzker Group.
The Pritzker family is no stranger to the behavioral health industry, profiting off of the very entitlements that Gov. Bruce Rauner’s opponent, JB Pritzker, seeks to uphold. They also seem to have funded the profit binge. The family flipped Foundations Recovery Network for a large multiple to Universal Health Services (NASDAQ: UHS) in 2015.
UHS just reached a $43 million settlement with the DOJ for infractions very similar to those that appear to be happening within Acadia’s infrastructure. In Little Rock, AR, for instance, the family of Joelly Clements, is searching for answers after their daughter’s body was found in the home of a nurse who worked at a UHS facility.
Many political pundits could argue this would actually swing the election Rauner’s way… if he led the national charge. Because the fraud and patient abuse perpetrated by Acadia is not just happening here in Illinois — it’s all over.
With insurers cracking down on the rampant fraud, it makes sense that Governor Rauner would call other leaders like Governor Fallin from Oklahoma. The Rolling Hills Hospital in the town of Ada, Oklahoma, has been sued twice. One suit alleges neglect, in which an unsupervised patient rendered another patient mentally incapacitated. The second alleges blatant neglect of a minor in care, as well as many other harmful actions, including many sexual assaults against children.
In Nevada, six law different claims name Seven Hills Hospital, another Acadia facility. One of the Nevada lawsuits alleges sexual assault and negligence, just like an Oklahoma one.
In Arizona, four employees were charged with manslaughter after a 5-year-old boy died. The following month, the child’s family filed a wrongful death suit against Ascent (owned by Acadia), the employees and its corporate entities for $135 million. The state epidemiologist said, “It would only be the second time in six years I’ve recommended closing anything.” Even the family of a 17-year-old; Chayse Vance, who died after discharge from Sonora Hills Hospital, is still looking for answers.
In a one-week period in 2017, at the Philadelphia area’s Belmont Behavioral Hospital, two suicides occurred at the facility. A lawsuit charges that the facility lacks sufficient and appropriately trained staff. The state cited the facility for lack of staff and lack of facilities that would prevent suicides, among other things. When state inspectors visited in November of 2017, they declared a state of imminent danger.
At Acadia’s Park Royal Hospital in Fort Myers, Florida, the location’s top physician since 2012 resigned, citing the decline of the facility under Acadia. He said, “Ultimately, it became a matter of principle over passion, and the former was non-negotiable for me.” The hospital risk physician told regulators that she had “walked into a hot mess of an organization,” according to a report from the Centers for Medicare and Medicaid Services.
Federal inspectors back them up, saying in a report that the facility is “too short-staffed to properly supervise patients, ignored their complaints, and had poor quality control procedures in place. The local sheriff’s office agrees, and is investigating the alleged sexual assault of a patient, as well as the deaths of two patients.
In Michigan, Harbor Oaks Hospital has been accused of rampant patient and staff abuse, and allegedly inflates staff to appropriate levels only when a visit from the Joint Commission is expected. A month-long news investigation found “a pattern of assaults on staff dating back years, repeated allegations of physical and sexual abuse involving patients.”
So, what if… someone chose to do something about this? What if Governor Rauner used the ability to do his job tomorrow — an ability Mr. Pritzker doesn’t have?
