Shares of Adeptus Health slumped by more than half Thursday after the nation's largest independent chain of free-standing emergency departments revealed while announcing a delay in filing year-end financials that its future depends on it securing long-term financing.
“There is substantial doubt about the company's ability to continue as a going concern absent its securing committed long-term financing,” Adeptus said in a U.S. Securities and Exchange Commission filing.
Once a high-flyer on Wall Street, Lewisville, Texas-based Adeptus has yet to shake off a liquidity problem that engulfed the company in November when it announced a surprise third-quarter operating loss of $14.5 million and the securing of $57 million in emergency loans.
That crisis prompted a sell-off of Adeptus shares. They fell 64% on Nov. 2, from $26.87 per share to $8.60.
The news from Adeptus Thursday had a similar effect. Shares dropped from $6.54 to $2.82. Adeptus shares had rebounded 36 cents, or 13%, to $3.16 as of noon Friday.
Adeptus decline to comment on this story. In its regulatory filing Thursday, Adeptus said it had missed its March 1 filing deadline for year-end earnings because it needed additional time to complete its analysis of impairment of goodwill and other assets.
The company also noted “material weakness” in internal controls over financial reporting, including its revenue recognition, accounts receivable and accounting for a contribution to an unconsolidated joint venture.
Adeptus operates 66 freestanding emergency departments (EDs). It opened 21 centers in 2016 alone. Of the 66, 24 are operated in joint ventures with hospitals, including not-for-profits such as Arlington, Texas-based Texas Health Resources.
Freestanding EDs, which are not attached to a hospital, are popping up across the country as independent operators and hospitals look to open new, convenient access points for patients, often in affluent suburbs.
HCA Holdings, the nation's largest investor-owned hospital company, has 60 freestanding EDs in 14 of its markets with plans to expand that number to 80 by early 2018, the Nashville-based company revealed in its year-end earnings call in January.
Freestanding EDs have come under recent fire for usually operating in affluent suburban areas and for allegedly not providing their share of charity care.
A study published in Health Affairs in October found 400 free-standing EDs in 32 states, with two to four times that many projected in the future. But only 15 of the 32 states required a physician to be on-site during all hours of operation and only 11 required a certified emergency physician on premises.
Adeptus resolved its short-term cash crisis in November by obtaining $30 million in additional credit and lined up $27.5 million more in preferred stock from Sterling Partners, former Adeptus CEO Tom Hall and co-founders Rick Covert and Dr. Jack Novak.
At the time, Adeptus said it was working with investment bank Goldman Sachs to do a refinancing to provide additional financial flexibility.
Efforts to reach an Adeptus spokesman Friday were unsuccessful.
During the third quarter, Adeptus facilities owned jointly with hospitals performed better than those operated independently by Adeptus.
The company reported that patient volumes at the hospital-owned facilities increased to 32,086 patient visits in the third quarter, an increase of 39% from the 23,038 visits logged in the prior year quarter. Revenue from those visits increased to $40.3 million, a jump of 18% from the prior year.
Meantime, volumes at Adeptus' stand-alone centers deceased 19% in the third quarter to 24,243 patient visits. Revenue at those centers fell in a similar manner. It was down 23% to $50 million from $65 million in the year-earlier quarter.