Los Angeles County Residential Treatment Center, 6-Bed Licensed Behavioral Health Facility

$3.0M

Revenue

$1.1M

SDE

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Full Editorial Writeup

This is a licensed six-bed residential treatment center in Los Angeles County serving adults with medium-acuity mental health needs. The facility delivers daily clinical monitoring and individualized treatment for conditions including depression, anxiety, PTSD, and related disorders, with a secondary line treating the mental health and stress concerns of patients managing autoimmune or chronic illness alongside their existing medical providers. Patients typically stay 30 to 45 days, which gives the clinical team a sustained runway to deliver meaningful outcomes in a small, controlled residential setting.

The economics are what make this notable. The center generated $2.968 million in collections against $900,000 in EBITDA and $1.062 million in reported cash flow, implying margins north of 30 percent on a facility with just six beds. Over the trailing twelve months it logged 72 new admissions, averaging six per month, with revenue driven primarily by insurance reimbursement.

The founder is explicitly looking for a group partnership rather than a clean exit, signaling a desire to keep quality intact while a capitalized behavioral health platform scales the operation. For a buyer with an existing behavioral health footprint, licensing expertise, and payer relationships, this is a bolt-on acquisition with a proven unit model in one of the largest and most demand-heavy mental health markets in the country.

Why we like it

Earnings quality is unusually strong for the asset size: $2.968 million in collections producing $900,000 EBITDA and $1.062 million cash flow means margins above 30 percent from a six-bed footprint in leased 2,600 square feet. That is capital-light relative to the earnings, with no real estate or heavy equipment inflating the price.
Durability is anchored in real clinical need and licensing. Residential behavioral health beds are license-gated and supply-constrained in California, which creates a defensible moat: a new entrant cannot simply open beds, they must navigate state licensure and payer credentialing that this operator has already cleared.
Mental health demand is secular and recession-resistant. Depression, anxiety, and PTSD do not pause in a downturn, and the insurance-driven payment model means collections come from payers rather than discretionary consumer wallets, insulating revenue from cyclical pressure.
The operator advantage is clear for a behavioral health group. With 72 admissions annually at 30 to 45 day stays, bed utilization and payer mix are the obvious levers, and an acquirer with existing credentialing infrastructure and referral networks can likely raise occupancy and reimbursement without proportional cost growth.

How to improve it

Audit bed utilization immediately. At six beds with 30 to 45 day stays, 72 admissions suggests meaningful idle capacity; map occupancy day by day over the trailing year and identify the gaps between discharge and next admission to lift revenue without adding a single bed.
Optimize the payer mix and rate schedule. Revenue is insurance-driven, so pull the reimbursement detail by payer and plan type, renegotiate the lowest-paying contracts, and pursue in-network status with higher-reimbursing commercial plans to expand the per-bed-day economics.
Build a formal referral engine. Within 90 days, establish and document relationships with discharge planners at local hospitals, outpatient psychiatrists, and primary care groups treating the autoimmune and chronic illness population already served, converting the ad hoc admission flow into a predictable pipeline.
Standardize clinical and compliance documentation. Residential behavioral health lives and dies on licensure and payer audits; tighten the medical record, treatment plan, and utilization review documentation to reduce denial and clawback risk and to make the facility scalable within a multi-site group.
Evaluate a second licensed site or bed expansion. The unit economics are proven, so model the capital and licensing timeline for adding beds or replicating the format in an adjacent LA County submarket where demand and payer density support it.
Retain and lock down the clinical team. Earnings this concentrated in a small facility depend heavily on key clinicians and the medical director; secure employment agreements, non-competes where enforceable, and a succession plan before the founder steps back.
Reduce single-facility concentration risk by diversifying admission sources. Track what share of admissions come from any single referrer or payer and deliberately broaden both so the business is not exposed to the loss of one hospital relationship or one insurance contract.

Diligence notes

Reconcile the gap between $900,000 EBITDA and $1.062 million cash flow, and confirm that cash flow is true owner SDE. With the founder staying on in a partnership, clarify what founder compensation, add-backs, and one-time items are baked into both figures before trusting the margin story.
Scrutinize the reimbursement and collections quality. Insurance-driven revenue carries denial, clawback, and utilization-review risk; pull the aged AR, denial rates, average days to collect, and any out-of-network billing that could be at risk of payer rate cuts or audit exposure.
Verify the license status, scope, and transferability. Confirm the specific state license, its conditions, any open deficiencies or survey findings, and whether it transfers cleanly in a partnership or change-of-control, because the entire moat rests on this.
Investigate admission concentration and durability. 72 admissions came from somewhere; identify the top referral sources and payer concentration, and assess whether the pipeline survives a change in ownership and the founder's reduced day-to-day involvement.
Review the lease on the 2,600 square foot facility. Since real estate is leased, confirm remaining term, renewal options, rent escalators, and whether the license is tied to this specific location, as a lease loss could be existential to a license-gated, location-specific operation.
Clarify the deal structure the founder actually wants. The listing describes a group partnership, not an outright sale, so determine what equity, rollover, control, and earn-out terms are on the table and whether a full buyout is even available before investing diligence hours.

Source

Originally listed on BizBuySell. View original listing →