Stronger normalized volume growth and revenue per day for the company continues to be stable as well. Some strong revenue trends for the company and momentum that we have going into the back half of the year, just combined with a continued focus on discipline on how we manage cost as we ramp the volumes, how we see a leveraging of the cost structure that we have always had built for this company that can now really be a resource for improvement as we bring on additional volumes.
There's a lot to unpack there, but Debbie, maybe I'll start at the higher level. As you talk about driving admissions growth and census, right? At a high level, how would you characterize the demand environment across the different service lines, and what trends should we be thinking about as we think through 2027?
I think that the demand trends continue to be very strong. I was mentioning earlier today, I saw some data that from 2020 to 2024, the incidence of mental illness has gone up by about 10 million. If you think about that, and then you also consider that only one in five individuals actually seek help, there's just an enormous group out there, not just for the mental illness, but for substance use treatment as well, that need care. We measure that through our referrals. We measure that through our inquiries, which have been very, very strong. If you take the acute service line, our volumes were up 5.5% in the second quarter. RTC continues to perform very well. They added a number of new beds that they've been able to fill.
If you look at specialty, even though, and David mentioned the headwind of New York, we've been able to make up some of those patients, but also just see strong performance across that portfolio. CTC, we continue to be very positive about, and I do think that we've seen volume increase there year over year. We do have a couple of areas where we have more clinics than we might have four or five years ago, but we still think that's a strong demand area as well. With those that need that kind of treatment, there's only 25% getting it, so that's an enormous group of people. Unfortunately, we get asked about NARCAN, and it's saving lives, but it's not eliminating the need for treatment.
No, that makes sense. David, I will shift to you. When Debbie joined, one of the things that she outlined was a $200 million EBITDA opportunity from ramping the 3,000 beds that you called out. I think you and I have had this discussion where when you joined the company, you validated the assumptions behind that and really looked deeper into it. Curious, as you think about the $200 million, just the confidence level that you guys have in terms of achieving that, and then what are the kind of milestones and steps. I know, Debbie, we have discussed this a bit, but what are those things that will get you to that $200 million?
Yeah, sure. I was excited to go through the details of that number when I rejoined the company at the end of April, and of course, Debbie rejoined in January. One of the first things that I know both of us focused on is the detailed plan by facility and the financial model by facility behind that $200 million number. Many of the facilities that we have added in the last four years were facilities that I know Debbie, in her previous tenure, that we signed joint venture partnerships with those partners, and we are now at a point in the last couple of years where those facilities have now opened.
Very familiar with the markets and the opportunity that we had and, yes, spent some time looking at that number and have been highly focused with the team on what can we do across all of those facilities, at whatever point in the process they are in today, to accelerate the ramp of the earnings from those facilities. We have recently, in August, opened our last of the new facilities, and we had just opened two facilities at the end of June. What that means for the company, we incur startup losses as new facilities open, and we are now at a point where we have opened the last facility that is in that four-year cohort of facilities. Some of the key milestones we are focused on today have been getting those newer facilities through the survey process, and we are happy.
I do not think we had this in hand when we reported our quarter, but the facilities that opened at the end of June, both have finished their survey and gotten accreditation really in record time. We cut that timeline in half compared to what we typically see and expect. Those facilities will now be on to payer contracting and then ramping up the census and the volumes from here. That is a huge step for our facilities to get through that first step, and we are really proud of what those local teams have been able to accomplish. Some of the facilities that are already at other points in the process, the key milestones that they are seeing today would be contracting with payers Medicare, Medicaid, and then all the commercial payers, once you have the Medicare and Medicaid contracting in hand.
And then just focused on ramping up the team and the referral sources. That does take time, but the team's focused on doing that as quickly as they can and are seeing tremendous progress. I know our goal, in general, as a company with a new facility, is to try to get to breakeven results, so get through the startup losses as close to one year from the first patient as we can. That, I think, has been a challenge in the last couple of years. But I know a facility that we opened in the third quarter of 2025 just hit their breakeven. It's taken a lot of great work from the operations team, a lot of focus and just acting with urgency. But all of those facilities are really having a great year, showing some great progress.
And we have, as a management team, increased confidence and, I'll say, visibility into being able to achieve that $200 million incremental EBITDA number.
Then maybe, Debbie, as I think about, you've been back in the seat now for almost nine months, right?
Almost.
Almost. In terms of the operational improvements and when we think about clinical outcomes, care quality, compliance, what do you think are the biggest changes that you've made or brought back to the table since you've been back in the seat?
Well, I think, we've said several times, even on our earnings calls, we're back to the basics. There was a lot of activity happening, but keeping a focus on our priorities was really what I tried to bring as I returned to the CEO role. I think, it starts really with a sense of urgency. I've said, we can all identify problems, but we also have to come up with action steps, and we need to have plans that are specific to look at the issues. We did a lot of that the first couple of months. It's just, what have we learned? How can we correct what we have control over? Then my first real focus, and I think it's spread through the company, I would hope, and that is the people that we have.
I took a look at what's the experience level, what is the scope, what is the geography that our leaders are managing, and what is their performance. As we did that, I'm a big believer that your team is the one that advances your strategies. But I've also said it's not just a strategy. You have to have action and results around that. Part of that's execution. But the other part that I think we've tried to build in, there's a lot of things you can look at in metrics, but what are the ones that matter, and what should we be viewing? One of the areas that we view now every week are the 23, 24, 25, and now 26 facilities that have opened. Where are we at? What do we need to do? Should we change our action steps?
All of these seem very basic, but really instilling this sense of urgency of we need to move. I will say, if someone says, "Well, we could probably get that done by August," I say, "Well, can we get it done by May?" Because again, the faster we can move, the better we will be. I think that it's just been great to see the team come together. They've really embraced this. It's not just one area of the company. They're really collaborating, Brian, with each other. I think they're excited to see progress and to see the results of the plans that we have put in place. We have had a focus on expense management as well. So it's occupancy, it is making sure that we remove barriers, communicate if they are a JV partner, but then also manage, as David mentioned earlier.
At what levels do we need to bring more staff on? How are we doing even with our core facilities? That's been another area that the whole team is focused on. What are the underperforming facilities? How can we improve them? We now have specific plans for each one of them. Where before, I think people said, "Well, they're just under where they need to be." Well, so what do we do about that, and how do we put these plans in place?
Debbie, where do you think is or are the largest remaining opportunities for upside or the areas where you could say we haven't touched the opportunity set yet?
I think we still have opportunity for new services. It's really more around the occupancy, though, for not just the beds that we invested in, but also, there's still room to grow occupancy in our core business and our legacy business. We talked a minute ago about the demand. It's so strong. We need to be looking at, are we doing everything we can to provide access, not just for our partners, but for the patients, and making sure that our admissions group is responsive. So again, back to the detail level of our operations. So I think there's opportunity, certainly with occupancy. I think that there's more opportunity to manage expenses. We're doing a much better job at that, and we can see that in the results. But I think that there's more opportunity there. Also, reimbursement. We are getting payer increases.
We want to identify other payer relationships where we think we need to push a little harder. Because we now have outcomes that we can use to demonstrate how we're doing and to demonstrate, you mentioned quality. What are we doing for the patient? We now have that across all of the acute service line. We are now putting that into our specialty line to be able to say when we're at the negotiating table, "These are our outcomes. This is what we're doing for your patients, and these are the metrics that we think they are focused on," one being readmissions and other metrics that have to do with our business.
That makes a lot of sense. David, just along the same lines, and maybe to get into a little more detail here on the reimbursement side and payer relationships. I think in one of your previous calls, you called out denials, payer audits, and basically aging AR in some cases from previous periods. So any updates you could share with us in terms of how that's tracking?
Yeah. Debbie mentioned rate increases from payers, which is very important, and I think, a positive as we move through the year. We also want to stay focused on what's been, for the company for about the last year, an elevated level of bad debts and denials that the company saw about a year ago, actually, in the third quarter. There was also an increase in AR days towards the end of last year, continuing into the early part of this year. We did see, as we reported our second quarter, some sequential stability in the bad debts and denials relative to Q1. For our industry in general, we should not see a very high level of bad denials just based on historical experience for the industry relative to other parts of healthcare.
Certainly believe there to be an opportunity to drive some improvement compared to what the company saw last year. Pleased to see the sequential stability there, the year-over-year headwind and the impact that the higher bad debt denials had on our revenue declined in the second quarter relative to the year-over-year headwind in Q1. We expect that year-over-year headwind to continue to decline as we move through the back half of the year, and the team is doing a great job managing this.
It has been not a broad issue for the company as we think about where we're seeing this, but isolated to certain payers and certain geographies, and the team is working very closely on how we manage that through having the right documentation and people to review our records and positioning the company for a higher level of successful bills and the utilization of technology as we go through that and are prepared to respond to payer responses to our billing. We are seeing some early signs of improvement and stability there, and hope that continues as we move through the back half of the year.
That's awesome. Maybe shifting gears a little bit. One question we got asked a lot after the second quarter is the PLGL adjustment that you reported for Q2. I think there's a little bit of confusion. Is that a one-timer, or does that change the earnings baseline? How would you describe, first, the PLGL dynamics for the Q2 adjustment that you made, and how to think about it going forward?
Sure. As we moved into this year, we knew from the beginning that we were going to be performing a more frequent actuarial review, which is the basis for our estimates. Had that plan for the second quarter. The company had a broader adjustment to its professional liability and general liability cost and reserves last year. That was really the driver of a more frequent review. As we reported the second quarter, we did have an adjustment in our reserves that was related to prior year claims. We went through a full actuarial report. Within that report, the estimate of current year cost was in line with previous forecasts, so we were certainly encouraged with the current year cost and incidents and the value assigned to those incidents. But, as many actuarial reports do, it is also reflective of how prior year cases settle or how they develop.
The key driver was actually just a narrow adjustment related to a handful of cases that the company had the opportunity to settle. We do not always think of settlement as the right strategy for the company. We have an aggressive, proactive process for defending claims where appropriate. It is a case-by-case decision that the team makes. But for this particular group of claims, we reached a settlement and thought that was the right decision for the company. That was reflected in the actuarial process that we went through in the second quarter. But as part of that, we wanted to highlight for investors, that relates to prior year reserves. Our current year estimates remain in line with what we expected going into this year.
So maybe, David, just to clarify, if my estimate for PLGL was $1 for 2026 and $1.50 for 2027, let us just say, this does not change the 2026 or the 2027, right?
That is right. Yeah.
Okay. Just to clarify. Thank you for that. Maybe Debbie, another question we have been asked a lot is how are you thinking about the long-term demand for acute behavioral services when you factor in the emergence of new therapies like SPRAVATO? I think now we are talking about ketamine, TMS. Just curious in terms of how you guys are viewing the demand outlook.
I think we have incorporated some of what I would consider to be innovative therapies that are out there. They are really complementary to the treatment that we provide. They are not going to, in my mind, replace someone needing to be in a secure facility to keep them safe. But I do think that physicians are utilizing those that they can. Some are not approved yet. There is a lot of talk about them, but they are not approved, and they are not reimbursable at this point. But we are open to using these, and I think we have a structure in the company because of our quality and our strong group in that area, that as they do look at testing some of the innovative therapies, we can do that, because they do have to be monitored. And some will fit a patient, and some will not.
With the strong demand that we see, I do not see them impacting other than hopefully improving the clinical experience for the patient. And that is what we want to be, is individualized when we think about our treatment.
That makes a lot of sense. Maybe in the same vein, when I think about the CTC business, number 1, how are you thinking about that environment today and the growth outlook for that business? I know you said earlier it is still growing, but also in the context of, we get the question a lot about non-methadone treatment options and how that is impacting or not impacting that side of your business.
Yeah. I think a lot of those have been out there for several years, so it is not new to our business. We still think that the gold standard is methadone. We do provide both. We do believe that, again, it is individualized by patient. 90% of those that go to our CTC clinics receive methadone. I think that just the demand there, only 25% are getting treatment. You have a big universe there, and we want to make sure that we are looking at the patient experience. Why are they coming to the clinic? Why are they preferring us? Make sure that our clinicians are moving them as appropriately through whatever is most appropriate for them and their situation.
Yeah, makes a lot of sense. Maybe, David, one question for you. As I think about, Debbie mentioned earlier, the workforce and hiring and labor. When I think of looking at BLS data, it looks like wage inflation for behavioral has been fairly flattish, right? Meaning it has not accelerated in the last few months. Curious how you are thinking about the labor line, both from an expense line perspective and also hiring, retention, and any KPIs you can share with us on your workforce.
Yeah. We think the labor market has been stable, and we think about that in terms of both supply of employees at our facilities. Especially as we open new facilities, we have had good access to just the right level of talent from a leadership and a clinical perspective. The wage inflation environment and the year-over-year increase has been stable for the industry. I think our metrics that we report reflect new facilities being opened. I know investors often are looking for a metric to measure how are we doing on labor, which is our most significant cost category. We have seen a very stable environment. New facilities have been able to find the right employees.
That is actually reflected in some of our metrics as an increase, just as we take on additional staffing costs in advance of a facility realizing the revenue potential and ramping up the volumes related to the staffing that we see added. Over time, some of those metrics, we think, will reflect more of an accurate performance as to wage inflation for the company. We have been really pleased to see also improvement in employee retention, which has been a longer-term trend that is happening in the business that we are very encouraged by. We remain focused on that, hope that that continues as we move ahead. Certainly, a stable labor environment from both a retention and inflation perspective.
I will just add, as employees join us, we put a real emphasis on onboarding, what is important to them, and we now track it at the 30-day mark, the 60-day, 90-day, to get feedback about why they have chosen Acadia and why they might leave Acadia. I think having that real-time data through some of the efforts that have been done within HR, and really at the facility level, have made a difference. I do think that as employees choose us, and we use our outcome data information, then that has been helpful to us for them to see, hey, they are getting these outcomes with the patients, because we want them to feel like they are part of the process and to own what they do and to do the right thing for the patient.
I do think that we have had a very positive trend in retention that we want to continue, and we continue to look at ways we can improve their experience as well.
Makes a lot of sense. Debbie, we have got two minutes left, and I am curious if there is anything you want to share with the audience, both on the webcast and here in the room, in terms of what you think is underappreciated about what is happening at Acadia today, or just any highlights you want as we think through the outlook going forward.
Well, the 3,000 beds that we have added since 2023, and that is record growth. I see so much opportunity there as we look at the demand. I think that as we make sure we are focused on execution, attention to detail, sense of urgency, there is a lot of potential for Acadia and the free cash flow that we can generate. As we lower our capital, we become disciplined about that, even more so than we have been. But also just the occupancy that we can build from those beds, as well as the core facilities. We have an advantage.
We have four service lines, so it is not just one of them, but it is really covering all of the continuum, in addition to partial and IOP, because we do have those as part of our portfolio, but we want to use them and think about what is our core mission, and that is to provide inpatient care. That is where I think the company is going to show that as we build that there is some very positive dynamics ahead. I have full confidence in achieving the $200 million.
That is amazing. Debbie, David, thank you so much.