Two years ago, Adeptus stock was trading at over $120/share. Today, a share costs $2.50. The fall of the nation’s preeminent provider of freestanding emergency centers is sending ripples through the once-booming industry, worrying both Wall Street and real estate professionals. The problems may just be the tip of the iceberg.
“When the first freestanding clinics opened, they needed four patients a day to break even. Now they need 12. They can’t collect,” Trabold said.
Trabold’s diagnosis was confirmed in Adeptus’ recent SEC filing, in which the company cited its need to “fix material weaknesses in controls of reporting.” In regulatory documents submitted to the SEC, Adeptus anticipated a net loss of $560M for 2016. Adeptus expects to report $67M in uncollectable receivables.
“If you have anyone who goes to a freestanding emergency department and they get a big bill, call them up and tell them you’ll pay half today and see what happens. It’s remarkable. That’s a bad business model,” Trabold said.
Much of the problem stems from uneducated consumers.
When the proliferation of freestanding and urgent care clinics began, the public could not distinguish between the two, which have different payment models. Freestanding emergency centers often failed to properly inform patients which facility is most appropriate, running up their bills instead, like a man being charged $3.9K to remove a splinter. Adeptus is facing a lawsuit over this very issue.