Ardent Health (ARDT) Stephens 26th Annual Investment Conference | NASH2024 summary

Business model and growth strategy

• Operates 30 hospitals and over 200 outpatient sites across eight fast-growing, midsize urban markets in six states, focusing on holistic patient care through a hub-and-spoke model.

• Growth is driven by joint ventures, especially with academic partners, enhancing market entry, brand credibility, and service expansion.

• University partnerships have enabled the addition of advanced services and improved recruitment, with ongoing discussions for future academic collaborations.

• Maintains market-leading positions, serving 1.2 million unique patients annually, with most encounters occurring outside the hospital setting.

• Focuses on expanding ambulatory and outpatient services to increase patient touchpoints and market share.

Financial outlook and margin enhancement

• Targets mid-to-high single-digit top-line growth, leveraging 3%+ population growth and normalized commercial rate increases.

• Expects EBITDA growth to match or exceed revenue growth, with margin improvement initiatives in supply chain, labor, and AI tools over the next 3-4 years.

• New Mexico’s Medicaid DPP program approval is anticipated to add 200 basis points to margins.

• Maintains disciplined acquisition strategy, aiming for deals that add shareholder value within 1-2 years and keep leverage near or below 3x, flexing up to 4x for the right transaction.

• Plans a step up in CapEx from 3% to 4% of revenues, primarily for ambulatory expansion.

Policy, regulatory, and market environment

• Sees incremental rather than disruptive changes from potential political shifts, with bipartisan support for supplemental payment programs like DPP.

• Exchange exposure is limited, with only 3% of admissions and 3.6% of revenue from exchanges; expects minimal impact from subsidy changes.

• DPP and other Medicaid add-on programs are viewed as durable, with CMS guidelines ensuring continuity through 2028.

• Monitors site-neutral payment policies and supply chain risks, but sees limited direct impact due to domestic sourcing and diversified suppliers.

• Labor market pressures have eased, with contract labor rates normalizing and professional fee pressures moderating.