Latest / Becker’s Healthcare Podcast / Scaling Smarter: Ascension’s Vision for Growth with Saurabh Tripathi

Transcript

Scaling Smarter: Ascension’s Vision for Growth with Saurabh Tripathi · Becker’s Healthcare Podcast

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  - There's a small circle of people who truly
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  - understand what it takes to lead a health
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  - system right now. The decisions are enormous.
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  - The variables are constantly shifting, and the stakes
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  - of getting a call wrong don't stay contained.
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  - That's not a complaint. It's a structural reality.
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  - And it's why the most effective c suite
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  - leaders are deliberate about where they go to
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  - pressure test their thinking.
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  - Becker's fourteenth annual CEO and CFO roundtable
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  - brings together more than 1,500
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  - executive level attendees
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  - and nearly 400 speakers for four days built
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  - around growth, financial sustainability,
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  - workforce strategy, and the leadership questions that don't
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  - have easy answers.
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  - Join us November second through the fifth in
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  - Chicago.
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  - For the agenda and event details,
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  - visit beckershospitalreview.com
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  - and click on the events tab in the
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  - upper right.
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  - This is Madeline with the Becker CFO and
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  - revenue cycle podcast, and I'm thrilled to be
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  - joined today by Saurabh Tapati,
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  - CFO and executive vice president of Ascension. Saurabh,
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  - thanks for joining me. Hey, Madeline. Thank you
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  - for inviting me. It's a pleasure to be
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  - on Becker's health care podcast.
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  - Amazing. So before we kick things off, do
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  - you mind sharing just a little bit about
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  - yourself, your background on health care, and more
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  - on Ascension with our listeners?
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  - Certainly.
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  - I've been with Ascension as CFO of Ascension
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  - for two and a half years, and I
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  - have the privilege of serving Ascension across
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  - all finance functions, including m and a, treasury,
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  - traditional finance and accounting,
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  - Ascension ventures,
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  - and Ascension investment functions.
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  - Prior to this role, I was CFO of
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  - Highmark Health, which is an integrated payer provider
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  - network
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  - based out of Pennsylvania.
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  - And I was responsible for all finance functions
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  - there for almost four and a half years.
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  - And before that, I spent, almost,
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  - my,
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  - entire twenty five year career in health care,
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  - a little bit in GE health care and
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  - Fresenius health health care as well in Boston.
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  - Thanks so much for that background. I really
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  - appreciate it. So I wanna dive right in
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  - with you here today. So in mid May,
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  - Ascension released its third quarter results.
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  - And so I was hoping you might be
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  - able to just kick us off and share
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  - how you're feeling, about the third quarter results
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  - before we dive into the logistics there.
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  - Yeah. Great question, Marlene. And if I may
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  - just go back a little bit in history,
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  - Ascension has been on a financial turnaround for
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  - almost, two and a half, three years now.
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  - Yeah. In the last two and a half
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  - years, we have seen almost 2,600,000,000
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  - of financial turnaround. This last quarter wasn't any
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  - surprise
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  - either.
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  - We saw 426,000,000
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  - improvement
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  - in our net income, almost 218%
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  - year over year improvement.
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  - And this is frankly driven by consistent
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  - operational improvement
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  - through all our operating metrics
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  - as well as mission focused,
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  - clinical care that our clinicians
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  - offer to our patients every single day.
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  - Yeah. Thank you for that. And, actually got
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  - right into the my next question I was
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  - gonna ask you. So as you said, and
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  - just again for our listeners here, third quarter
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  - fiscal year twenty twenty six, four hundred and
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  - twenty six million or 218%
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  - year over year net income growth. Could you
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  - dive a little deeper into what you feel
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  - is really most responsible here for that turnaround
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  - just to get some some more details there?
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  - Yeah. If I could unpack the result a
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  - little bit, Madeline. 400,
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  - 26,000,000
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  - of net income improvement
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  - was a combination of 262,000,000
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  - improvement in operating income,
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  - which was driven by higher volume,
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  - more acute patients coming to Ascension facilities,
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  - a higher commercial mix that we are serving
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  - across our footprint of roughly
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  - a 100 or so hospitals.
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  - And then we also saw,
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  - really, truly,
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  - good operational productivity
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  - when it comes to contract labor management,
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  - when it comes to length of stay improvement
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  - in our hospitals,
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  - when it comes to supplies
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  - and,
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  - drugs,
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  - cost efficiency.
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  - We have seen improvement in pretty much all
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  - metrics across,
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  - and that led to 262,000,000
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  - in operating margin improvement.
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  - We also benefited from strong investment markets,
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  - and that helped our investment income come in.
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  - So the combination of higher investment income and
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  - operating income helped us with the 426,000,000
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  - improvement year over year. Yeah. Thank you for
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  - that breakdown there. And I I'm gonna look
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  - at total operating revenue now. So that did
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  - fall from 19,500,000,000
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  - to 18,100,000,000
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  - for the nine months ending March 31.
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  - And, you know, Ascension has reduced its hospital
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  - portfolio from and keep me honest here, from
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  - a 139
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  - to 90 facilities.
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  - So in
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  - your view as CFO, at what point does
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  - smaller, more focused portfolio begin to show up
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  - more clearly in in the operating line?
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  - Yeah. Another great question, Madeline. So Ascension did
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  - right size our portfolio from 139
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  - to 90 fully owned hospitals
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  - and 29 joint venture hospitals. So roughly 190
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  - if you add all of them.
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  - And we have been really intentional in the
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  - last two and a half years of our
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  - turnaround
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  - in making sure our acute hospital portfolio is
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  - focused on
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  - less legacy structure
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  - and find the right partners in The States
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  - where we divested our facilities.
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  - And I'll give you a few few examples.
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  - You know, Chicago,
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  - we found a partner with Trine Healthcare,
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  - where we have given some of our facilities
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  - to them.
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  - In Alabama,
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  - we found a partner in University of Alabama,
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  - and we divested some of our facilities there
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  - as well.
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  - By rightsizing our footprint, we have been able
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  - to build a predictable and consistent operating performance
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  - and focus our capital deployment in those facilities.
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  - And most importantly, now Ascension is pivoting towards
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  - ambulatory
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  - care. And you may have heard recently we
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  - acquired AmSurge.
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  - We just got a by FTC.
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  - So this freed us the capacity
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  - and capital
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  - so that we can focus on ambulatory care.
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  - Yeah. Definitely.
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  - And I would like to hear from you
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  - too. When you think of growth, what would
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  - you say smart growth looks like to you?
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  - I know that there's been some consolidation with
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  - the portfolio, but looking to the future, what's
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  - that smart growth look like in your eyes?
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  - That's a great question, Madeline. When we think
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  - about growth, we don't think about brick and
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  - mortar growth. We don't think about number of
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  - hospitals.
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  - We think about how many patients we are
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  - serving
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  - and how do we provide the best clinical
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  - care to our patients
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  - in the most optimal setting where they need
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  - it, when they need it. And hence, our
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  - pivot towards ambulatory care settings. Because, let's face
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  - it,
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  - no one wants to stay in a hospital
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  - longer than they have to. You know, people
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  - want to go into an ambulatory care,
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  - get their procedures done, and quickly go back
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  - to their loved one loved ones in the
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  - hospital. So
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  - when we think about smart growth, we think
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  - about how do we take care of patients
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  - holistically,
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  - when they need it, where they need it
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  - in the most efficient care setting,
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  - not necessarily number of hospitals and then brick
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  - and mortar settings.
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  - Yeah. I wanna backtrack just a tiny bit.
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  - I know you just mentioned the AmSurge deal
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  - there. Anything you can share with us? I
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  - know you said this literally just happened. So
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  - any any additional details there?
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  - It's an exciting,
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  - growth in our strategy.
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  - And, Madeline, you mentioned how do we think
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  - about smart growth.
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  - If you think about ASC settings, these are
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  - places where patients go for
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  - less severe surgeries, nips knee surgery, hip surgery,
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  - less acute procedures.
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  - These procedures
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  - don't necessarily need to be done in an
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  - acute care in a hospital setting.
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  - So as Ascension
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  - vitalize our portfolio
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  - and we reduce our acute footprint,
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  - we wanted to make sure we expand in
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  - the areas where patients
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  - are going or where the payers want the
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  - patients to be taken care of.
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  - And that's where ambulatory strategy came in. So
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  - Amsearch brings in roughly 250
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  - ASCs to our portfolio.
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  - Ascension already has about 60 ASCs, so this
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  - brings us roughly 310
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  - or so ASCs
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  - across our portfolio in thirty four days.
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  - And that will make Ascension one of the
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  - largest ASC platform in the country
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  - along with our acute care
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  - hospitals as well.
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  - Hopefully, we can bring better clinical care in
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  - lower cost setting to our patients,
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  - and this will help our patients go to
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  - the places they need to versus have to
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  - go to a hospital for their clinical care.
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  - Yeah. Definitely exciting time of growth right there
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  - in the ASC space.
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  - Wanna shift gears just a tiny bit with
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  - you now and talk about, you know, back
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  - to the financial report of long term,
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  - growth. You know, of course, long term debt
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  - right now at Ascension does stand a little
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  - bit over 9,000,000,000.
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  - So in this instance, what would you say
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  - are ways that you're looking to manage that
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  - moving forward?
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  - Another great question, Madeline. I'll say Ascension has
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  - a very strong balance sheet. We have roughly
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  - 45,000,000,000
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  - of total assets,
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  - and, our rating agencies have recognized it. We
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  - enjoy a very strong rating,
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  - double a from all three rating agencies,
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  - Moody's, S and P, and Pitch.
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  - And that allows us to borrow
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  - smartly, wisely at a lower cost of capital.
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  - So the 9,000,000,000 debt that you mentioned, you
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  - know, one of the metrics they measure
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  - is what is your
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  - debt to cap ratio,
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  - Debt to capital ratio.
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  - Ascension enjoys a very high debt to cap
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  - ratio.
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  - We also have
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  - the debt to cash, which is how many
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  - times of the debt can you pay,
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  - from your existing cash.
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  - Ascension can pay almost the entire debt plus
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  - some more.
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  - Our
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  - debt service ratio is 10.4
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  - x, which is we can service our debt
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  - interest
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  - almost 10 times more.
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  - So all that is we manage our debt
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  - very wisely. We make sure our borrowing cost
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  - is low,
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  - and we make sure our debt to cap
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  - ratio
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  - and our debt service coverage ratio remains strong
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  - for our rating agencies.
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  - Yeah. So sitting in a pretty solid position
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  - there for sure.
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  - Absolutely. And
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  - in the press release that,
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  - Ascension shared,
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  - for, again, its most recent, financial report,
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  - you mentioned that higher volumes, better efficiency, and
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  - more consistent execution are the system's key drivers.
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  - So this in mind looking towards the rest
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  - of the year, can't believe we're already more
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  - than almost halfway through.
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  - What must Ascension do to continue that momentum?
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  - Great question, Marlene. I'll say we must stay
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  - firmly on the path of transformation. As I
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  - mentioned, it's been two and a half years,
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  - almost three years now.
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  - But we cannot stop listening and, cannot be
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  - distracted by what's going on.
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  - So I'm blessed to have a very strong
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  - operating leaders
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  - with us here in Ascension
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  - who are everyday serving our patients, driving operational
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  - execution and accountability.
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  - We must need to, continue to improve
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  - care coordination,
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  - reduce our administrative friction,
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  - and also take care where the patients need
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  - it in the most efficient manner, as I
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  - mentioned in ambulatory care settings.
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  - Sustaining all of this momentum requires a lot
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  - of collaboration
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  - and a lot of communication.
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  - And with the leadership from right from our
• 12:14
  - CEO, Eduardo Conrado,
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  - and all the way down to a 100,000
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  - associates,
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  - I'm confident we'll be able to deliver that
• 12:23
  - mission.
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  - And to to round us off here today,
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  - I've got a fun one for you. So
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  - you oversee
• 12:29
  - one of the largest systems in The US.
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  - And so this in mind from a a
• 12:33
  - financial perspective,
• 12:35
  - what would you say to some of our
• 12:36
  - listeners who are maybe newer into health care
• 12:38
  - finance or looking to work their way up?
• 12:40
  - What advice would you have for them?
• 12:43
  - That's a great question, Marilyn. I've been in
• 12:44
  - health care for twenty five years, and I'm
• 12:46
  - blessed to be part of Ascension and in
• 12:48
  - this role. You know, one piece of advice
• 12:51
  - I'll give to, younger professionals in finance is
• 12:54
  - find your purpose.
• 12:56
  - Mhmm. You know, if you age
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  - in a purposeful,
• 13:01
  - vocation,
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  - your job doesn't remain a job. It becomes,
• 13:07
  - something that you are waking up every day
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  - and living the dream. You are following the
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  - passion.
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  - And I coach this to my kids as
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  - well. You know, then at that point,
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  - you're not chasing a title. You're not chasing
• 13:21
  - an office. You're not chasing a certain amount
• 13:24
  - of compensation.
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  - You are chasing a dream, and it becomes
• 13:28
  - a passion. So follow your passion, find your
• 13:31
  - purpose,
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  - and you'll be very successful.
• 13:34
  - Well, that is some great advice, and I
• 13:36
  - think that can go across multiple industries as
• 13:38
  - well. So thank you so much. It's been
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  - such a pleasure having you on, sir Rob.
• 13:42
  - I really appreciate you breaking down, Ascension's q
• 13:45
  - three earnings and, you know, just sharing what
• 13:47
  - the future's looking like at the system. So
• 13:49
  - I look forward to staying in touch and
• 13:51
  - connecting with you again soon.
• 13:52
  - Well, thank you for the opportunity, Madeline, for
• 13:54
  - me to tell the Ascension story. Awesome. Thank
• 13:57
  - you.