Hospital Admissions Climbing, Analyst Says

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According to a survey of administrators at behavioral hospital by Longbow Research healthcare analyst David Bachman, admissions are rising and there is a notable increase in admissions for substance abuse. See attached report and key takeaways below.

Key takeaways from the survey are as follows:

• Admissions are higher, with acute inpatient and outpatient leading the rise – Overall, a majority of industry contacts, 58.6%, said admissions were higher year over year.

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• Substance Abuse treatment is growing – Among the two major service categories, a majority of contacts said their substance abuse treatment admissions have grown in 2Q08, about 60%.

• Adolescent care is steady while adult population grows – Our survey respondents showed mostly stable levels of children and adolescent populations, while more reported an increase in adult patients.

• No end to capacity constraints – Sixty-five percent of contacts noted their facilities maintain a waiting list and/or have turned patients away in the past year because there were no open beds.

Mr. Bachman said the survey results were positive for Psychiatric Solutions (PSYS). “We maintain our BUY rating of PSYS following our behavioral hospital admissions, and we view Monday’s sell-off as a good buying opportunity for investors. The survey results indicate that volumes are generally on the rise, and individual service and population segments are exhibiting stability. In addition, the survey confirms fairly widespread capacity constraints, which PSYS is addressing through steady bed expansion and targeted acquisitions.”

Story provided by David Bachman of Longbow Research. To speak with Mr. Bachman, contact me at 610-505-0832 or [email protected]

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