When Stonegate Securities came out with their positive report on AdCare Health Systems, a rapidly expanding provider of nursing homes and care facilities, they focused on how the new management team has helped transition the company to a superior growth strategy, a strategy giving AdCare significantly better growth rates than the industry average.
The report gives spectacular projected growth rates for AdCare over the next few years, and then goes on to say that the given figures also have notable upside potential, since they do not include currently unannounced acquisitions in the pipeline. Considering that the anticipated ADK growth figure given for 2012 is 87%, versus a 6% average for the industry, it clearly sets AdCare apart. The report concludes conservatively that ADK is creating incremental and sustainable value for its shareholders.
The current state of the care facility industry is one of fragmentation, with the majority of facilities being small, privately owned, individually managed, long-term and tight-margin operations. Short-term care facilities, for people recovering from strokes, heart attacks, or other health crisis, often covered by Medicare, offer a significantly higher margin, but fewer such facilities are being built. The AdCare approach, unique in the industry, is to acquire the low-end operations and move them to the higher-end model, using proven management techniques to increase efficiency while actually improving the care provided. It is a challenge, requiring working closely with state regulators, but AdCare has identified the best states for what they are doing.
AdCare prefers to own versus lease, but evaluates each acquisition opportunity on its own mix of merits. The company has already grown dramatically, now with dozens of facilities spread over Ohio, Georgia, Arkansas, Alabama, and North Carolina, with new ones always on the way,
For additional information, visit the company’s website at www.AdCareHealth.com
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