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Acquisitions
 12 Months Ended
Dec. 31, 2025
Business Combination [Abstract]  
Acquisitions

5. Acquisitions

The Company’s acquisition strategy is to acquire and develop behavioral healthcare facilities and improve operating results within its acquired facilities and other behavioral healthcare operations.

On February 22, 2024, the Company acquired substantially all of the assets of Turning Point Centers (“Turning Point”), a 76-bed specialty provider of substance use disorder and primary mental health treatment services that supports the Salt Lake City, Utah,

metropolitan market. Turning Point provides a full continuum of treatment services, including residential, partial hospitalization and intensive outpatient services.

Goodwill

The Company’s goodwill is evaluated for impairment annually during the fourth quarter or more frequently if events indicate the carrying value of a reporting unit may not be recoverable.

As of the annual impairment test on October 1, 2025, the Company had one reporting unit, behavioral healthcare services. In performing the goodwill impairment test, the Company used a combination of the income and market approaches to estimate the fair value of the reporting unit. Determining fair value requires substantial judgment and use of significant unobservable inputs, which are categorized as Level 3 fair value measurements. For the income approach, the Company used a discounted cash flow model in which cash flows are projected using internal forecasts over future periods, plus a terminal value, and are discounted to present value using a risk-adjusted rate of return. The Company’s internal forecasts include estimates of growth rates and profitability based on management’s current views of the long-term outlook of the reporting unit. Discount rate assumptions are based on an assessment of the risk inherent in the projected future cash flows. For the market approach, the Company compared its reporting unit to guideline companies actively traded in public markets and included a control premium, which was based on acquisition premiums of selected companies similar to the reporting unit. These estimates and assumptions were determined in connection with support from a third-party valuation specialist. As of the annual impairment test on October 1, 2025, the fair value of the Company’s behavioral healthcare services reporting unit exceeded its carrying value, and therefore no impairment was recorded.

Subsequent to the annual impairment test on October 1, 2025, management identified a triggering event consisting of the combination of a significant increase in higher professional and general liability expenses associated primarily with patient-related litigation; lower internal revenue projections for future years to reflect expected changes in Medicaid reimbursement, primarily related to out-of-state referrals; and a sustained decline in the Company’s stock price and overall market capitalization. As a result, management conducted another test for goodwill impairment as of December 31, 2025. This subsequent goodwill impairment analysis resulted in a non-cash goodwill impairment charge of $996.2 million, representing the amount by which the Company’s book value exceeds its fair value, which is included in loss on impairment in the consolidated statement of operations. The decline in fair value of the behavioral healthcare services reporting unit primarily resulted from changes in expected future cash flows as a result of higher professional and general liability expenses, lower revenues and a higher discount rate corresponding to the risks inherent in the reporting unit.

No goodwill impairment charges were recorded during the years ended December 31, 2024 or 2023.

The following table summarizes changes in goodwill for the years ended December 31, 2025 and 2024 (in thousands):

 

Balance at January 1, 2024

 

$

2,225,962

 

Increase from acquisitions

 

 

38,889

 

Balance at December 31, 2024

 

 

2,264,851

 

Increase from acquisitions

 

 

27,691

 

Decrease from impairment of goodwill

 

 

(996,200

)

Balance at December 31, 2025

 

$

1,296,342

 

Of the increases to goodwill from acquisitions in 2025 and 2024 (including opening balance sheet adjustments made in 2025 related to 2024 acquisitions), the Company expects $5.0 million and $36.2 million to be tax-deductible for the years ended December 31, 2025 and 2024, respectively.