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.

Wall Street was shocked last week when Adeptus, the largest operator of freestanding emergency centers in the nation, filed a Non-Timely 10-K with the Securities and Exchange Commission. VMG Health managing director John Trabold experienced the industry's fundamental problem firsthand.

“I love my Millennial son and he’s not here so I’m going to bash him a bit. When he had an earache, he went to a freestanding emergency department,” Trabold said at Bisnow’s Big South Healthcare event. His son’s bill was so large he could not afford the cost himself. “I learned a lesson, not him, because I got the bill. I couldn’t believe it was $2,600 for an earache.”

In a presentation to VMG Health, the former CEO of Adeptus indicated that when the first freestanding clinics opened, they needed four patients a day to break even.

"Now they need 12 ... they're having trouble collecting their bills,” Trabold said. Trabold thinks the issues Adeptus is facing hint at a slowdown in the space.

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.

A major problem for Adeptus has been the perceived overlap with urgent care facilities. Freestanding emergency care centers have been struggling to adapt with the changing landscape of the space, as major hospitals systems partner with micro-hospitals and other developers to reach patients in outlying areas. Adeptus has partnered with Texas Health Resources, but it may not be enough. Consumers are increasingly turning to facilities with partnerships for guaranteed in-network access. Trabold said facilities that partnered with a health system have totally different economics, a different dynamic, and are not struggling as some independent, for-profit centers are.

Adeptus went public in 2014 and now has more than 90 facilities in several states, including Texas, Colorado and Ohio. Revenues, which were $103M in 2013, tripled to $365M by 2015.

Troubles started on Nov. 1, 2016, when Adeptus delayed its Q3 results by a day — then announced an emergency issuance of preferred stock to a handful of insiders. Shares plummeted more than 70% the next day. The CEO left soon after, then the lawsuits began.

“What scares me most about this is the investment community buying into these properties,” Trabold said. “There’s some very big REITs out there who bought into these and then got lease rates at $70/SF. If they have to re-trade those lease rates they’ll be substantially less.”

While Adeptus struggles, not every for-profit emergency room center is suffering the same fate. Nashville-based HCA Holdings, one of the nation’s largest for-profit providers, told investors this January it is adding freestanding facilities in 14 major markets. The company plans to have 80 facilities in operation by the end of 2018.

But overall, Trabold foresees fewer freestanding ERs being built in the next cycle.

“Twenty-five years ago you saw a service station getting put on every corner, then 10 years ago you saw banks, then CVS and Walgreens. Now you’re seeing urgent care and freestanding emergency departments. The latter you may not be seeing as much in the next years,” Trabold said.

"We’ve been talking about it, we’ve been seeing it. I’ve been reading the tea leaves for years. Adeptus just confirmed it, we may have a slowdown in this space going forward. Consumers are getting wiser.”

CORRECTION, MARCH 9, 2017 3:25 P.M. EST: An earlier version of the story blended quotes from Trabold and the former CEO of Adeptus. The quotes have been clarified.