Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from [Alim Talmud] – Boston Partners.
Alim Talmud – Boston Partners
First of all, you’ve got Detroit and Seven Hills and Seven Hills should incrementally add over $12 million , $12 millionish. Then Detroit should add something, and when you line it all up that puts us nicely above 20%. Am I missing anything by chance?
Bruce Shear
Just the timing of opening Capstone which we’re already going to be starting Q2. And there’s still phase in and we’re not quite full at Seven Hills yet, running at the annual revenue rate of north of $10 million. So we’re still sort of ramping that up. Capstone we’re anticipating an annualized revenue of about $5 million once that gets fully occupied. And we have had experience – I mean our track record on the adjudicated beds is that they do fill pretty quickly.
But again I think on an annualized revenue base, you’re right. Compared to last year it’s
$10, $15 million plus on an annualized revenue rate. Yes.
Alim Talmud – Boston Partners
You had mentioned this capitated business. Can you explain the dynamics so you – I’m just a little confused.
Bruce Shear
We have some large contracts in Las Vegas where we get a fixed rate, no matter what the utilization is. If the utilization is low, then our profit margins are higher. If the utilization is high, then our profit margins aren’t as high. There’s been a national trend and it’s been reported by all of the healthcare companies, not only behavioral health companies but medical companies, that they’ve seen significantly increase in utilization over the last six months.
We’ve experienced that, too, in Las Vegas. Now we’re able to moderate that to some degree because we are able to treat those patients in our own hospital. So we’re not going to see such a huge impact as some of our other peers might. But again it has had an impact. And as a result of that, we’re going back to our customers and they’ve acknowledged the fact that there’s been an unusual increase in utilization to renegotiate our contracts to take some of that into account.
Alim Talmud – Boston Partners
We naturally had some guaranteed escalators built into those contracts, right?
Bruce Shear
That’s correct.
Alim Talmud – Boston Partners
And so hopefully we’ll be able to go back and increase another amount and then also get some better margin on those contracts?
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