Good afternoon, and welcome back to KeyBanc's Healthcare Forum and the Ardent Health presentation. My name is Matthew Gilmore, and I lead Healthcare Services Equity Research for KeyBanc Capital Markets. Joining me on screen is Ardent Health's CEO, Marty Bonick, CFO, Alfred Lumsdaine, and SVP of Investor Relations, Dave Styblo. Ardent is a leading provider of healthcare services, operating 30 acute care hospitals and over 280 sites of care across 8 faster-growing mid-sized markets. Ardent is also distinguished by its joint venture growth strategy, which we'll get into later in the chat. This will be a fireside discussion. I'll lead the Q&A. Feel free to submit questions through the dialogue box, or you can just email me, and we'll get them addressed. With that out of the way, Marty, Alfred, and Dave, welcome, and thanks for being here. Great to be here with you, Matthew. Thank you. Thank you. I was gonna start off the conversation just with a sort of state of the union question. What were some of the drivers of performance during 2025? What were some of the challenges that, you know, emerged? And then as we think about 2026, what are some of the major areas of focus for the company? I'll start, and then Alfred can chime in here. 2025 was a great year for us in a lot of respects. It was our first full year being a public company. We saw great growth. Again, Ardent operates in eight mid-sized urban markets across the country. We have leading market share in the majority of those markets, number one or number two in the majority of those markets. We saw great admission growth, surgical growth, adjusted admission growth, and ER growth across the spectrum, even at the higher end of our peer group as we look at those different statistics. Coupled with that, when we went public, we mentioned that we were going to have a tripartite growth strategy, growing margins, growing our outpatient footprint beyond the inpatient market share strength that we have, and then, you know, we did see a modest expansion of margin, despite some of the industry headwinds and pressures that we're overcoming. We definitely made progress on our outpatient side, acquiring over the last two years, over 20 urgent care centers, two big acquisitions, and then some tuck-in de novo developments, which is helping us to pull through additional volume into the core. We have hired a new chief development officer last summer who is broadening the pipeline. We are going to be very selective on that new market growth, and have not done any since the IPO, but the pipeline is building and we like the momentum. We're looking for that next right hospital or market to enter the system. A lot of things went well for us. On the challenges side, the industry pressures of payer headwinds, largely denials and underpayments have been a persistent trend across the industry. You know, we have definitely seen an elevated amount of denials that picked up in the second half of last year, which was similar to the second half of 2024. As the payers have struggled, they can't make mid-year adjustments to their rates, and so they tightened the purse strings, so to speak, in terms of what pulled through. We felt that impact, coupled with a, you know, challenging medical malpractice environment in New Mexico, and we had some adverse claim development on that market that challenged us. Outside of that, the operations performed well, and most importantly, we feel very solid about our IMPACT programs, which was our focus to drive incremental improvement inside of the hospital, improving margins, performance, agility, and care transformation to be able to deliver better financial results. As we enter into 2026, our focus is building off the momentum that we saw and the strong performance around labor, in particular in the fourth quarter, and building upon that momentum as we continue into 2026 and that selective growth, you know, selective, but meaningful growth across that outpatient footprint. Yeah, Marty did a great job summarizing the headwinds and tailwinds as we think about moving from 2025 to 2026. You know, Marty touched on the, you know, from a tailwind perspective, the IMPACT programs. In addition, you know, we are in great growing markets. We have strong population growth, strong economic growth across our markets, and we are putting at the midpoint of our guidance kind of our core growth at 4%. Marty touched on some of the headwinds for 2026. The one other thing I would touch on, of course, is the exchange, the lack of the renewal of the exchange subsidies. We have quantified that in our guidance as a $35 million headwind. The kind of metrics that get you there, we're assuming a 20% loss of enrollment in our HIX plans. Now, that's more, you know, to date, we've actually seen growth in the states we're in, and we'll see what happens as, you know, premium payment or lack of payment works its way through the process. And of that 20%, assumed loss of enrollment, we've assumed 10%-15% would move to traditional commercial, with the rest moving to self-pay. Of that cohort, that we'd see a reduction of about 30% in underlying utilization. We think we've been appropriately prudent in quantifying that. You know, we're of course we'll always hope for the best, but at the same time, you know, we're just in a period that we don't know exactly how that will play out, and we think prudence is called for as we develop our outlook. Great. I appreciate the foundational comments. I was gonna sort of go small picture and then work our way up to some of the big picture questions, if you don't mind. So I thought we might just ground ourselves in some of the puts and takes on EBITDA for this year. Alfred, I think you hit maybe some of them already, but maybe just sort of remind us on the payer pressures that you're absorbing and the issues with the higher professional fees, but I think you hit on the IMPACT and the HIX subsidies already. Just give us some- Yeah, happy to walk through that. Yeah. You know, we left 2025 with EBITDA of $545 million. We've talked about the elevated denials and acceleration of pro fee headwinds last year. Because we saw that accelerate again in the back half of the year, if nothing changes, and at the midpoint of our guidance, that's what we've assumed, is that that back half experience gets repeated, then we've got a headwind over the first half of 2026, and we've quantified that at the midpoint at about $50 million. Another, you know, we'll call it a headwind, but of course, since we didn't achieve our guidance last year, we didn't fully fund our short-term incentives, and restoring those to 100% funding would be an additional roughly, call it, $18 million-$20 million. Those are kind of the. You know, I've already talked about the exchange headwind, which we've quantified it at $35 million. From a tailwind perspective, last year we exited with IMPACT initiatives identified and actually achieved $5 million in Q4, and that $5 million annualizes out to about a $40 million tailwind for the full year. We've added to that inventory of margin enhancement initiatives an additional expectation at the midpoint of $15 million. In addition, I've mentioned that core growth rate assumption of 4%, which at the midpoint would deliver a tailwind of $20 million. That gets you to the midpoint of our guidance this year of $510 million. We did mention in our year-end call, we would expect, as we lap some of these, the elevated payer denials, the pressure from pro fees, that we would return to EBITDA growth in 2027. Got it. Let me pick up on some of those strands. I first wanted to start off on the professional fees. You know, we were encouraged by some of the comments coming out of the fourth quarter call that you'd seen some stabilization in the professional fees and also the payer denials. Can you maybe just first give us a sense for some of the actions you took coming into the back half of the year and into 2026 to address those issues? Then what are some of those signs you're seeing that hopefully continue that suggest that, you know, headwind is potentially stabilized and maybe improving even? Yeah. Maybe I'll start with pro fees and let Alfred talk, touch on the payer denials, 'cause we've got actions going on both sides, as you can imagine. You know, from a professional fee side, you know, probably the biggest headwind that we did not see last year and we overcame it in the first half, but it continued to just mount and it manifests itself in the second half was not just the expansion of pro fees, you know, as a percentage base, but new contracts coming into fold, particularly in radiology. The previous years, we had dealt with anesthesia, we had dealt with ER, but it is the payers have largely been working through the surprise billing legislation and the impacts that's had on different provider groups. It seems like it was radiology's turn in the cycle, which prompted us to go from having largely no subsidies with these groups to now starting a subsidy. If we were spending, you know, $X thousand on anesthesia and we had a 10% increase, that's 10% increase. When you're going from 0% to X%, it's a bigger headwind to absorb. We ended up absorbing a lot on the radiology side. We've substantially gone through the markets now, feel that we've got solid contracting underneath us from an anesthesia, from an ER, and a radiology perspective now, and we'll get back to sort of the normal contract negotiations, which are not normal inflation any longer because there's still a significant supply-demand issue with these specialties that's driving rate pressure up, and we're having to contend with this, as well as the payers pressing on their revenue streams and causing us to have to sort of subsidize the balance. We're still forecasting, you know, sort of a high single-digit inflation in this line item for this year, but hopefully reducing it from the higher levels that we've seen over the prior two. On the payer denials, Matthew, I'll take it from kind of a granular level and take it up. You know, in terms of the things that we are doing, and, you know, I would divide it into five buckets and won't bore you with the details of each, but, you know, I would categorize them as, you know, taking steps to expand our appeals and our demand strategy, you know, being more aggressive in the appeal and demand process, standardizing our process for appeals, which makes them go faster and more efficient, improving our coordination of benefits with the payers, enhancing our claims sequencing, and then last, I would say hardening our authorization, pre-authorization processes. You know, very tactical but tangible things that we're doing on our end. At a higher level, we're also working to incorporate contract changes into our contracts to kind of address these things or prevent them on the front end, in our renegotiation with our payer contracts. Now, that takes a longer time, of course, to play its way out through the renewal cycle. You know, I'd say lastly, you know, in terms of what's being, quote-unquote, "done to us," you know, we're hopeful, but not, you know, we haven't incorporated it into our thinking, that, you know, better underwriting, better premium pricing, which we've all seen the headline rate increases from the payers, that will yield, you know, less, you know, what I would call gamesmanship in terms of slow paying of claims that we saw the big step-up this past year. Got it. On the payer denials, is it fair to sort of characterize that as maybe some signs of early improvement, or is it just too soon to tell, and we'll see how the cash flow develops. I'd say it's too soon to tell, and it would still be fair to say that, you know, we're cautiously optimistic. Got it. Okay. Let me follow up then on the IMPACT program. You know, you mentioned it is now up to $55 million, which is up from $40 million. I wanted to dig in a little bit and just have you characterize, you know, where you're seeing those additional savings. Then the other question we had on this is we were, you know, kind of pleasantly surprised at just how quickly the organization seemed to respond when you had these challenges, and I thought you might take a moment there and just, you know, give us some sense for, how you're able to sort of make that possible and sort of push through some of these efficiencies in a pretty short, period of time. Yeah. Well, unfortunately, we didn't respond quick enough to offset some of the headwinds that Alfred talked about on the payer side. You know, we understand that we have to transform the way in which we're doing the business. Last spring, we brought on Dave Caspers as our Chief Operating Officer, and he's fully ingrained into the organization and come up to speed. He's brought just an additional level of rigor and discipline to the company in terms of the focusing on controlling the controllables. Our IMPACT program is about focusing on where we can make a difference inside the organization. Labor is our biggest line item, and so it's our most important line item in terms of caring and providing our purpose, but it's also one that can be controlled. As he's gotten deeper into the organization, the operating day to day, week to week, month to month operating cadence and rhythm has delivered results. You know, we can control our people. We have an attrition rate, you know, that's just every system has, so we've got a built-in attrition rate that we can help control. Where do we backfill? Where do we rehire? Our precision staffing focused initiatives are guided around those principles. Then also just ensuring we've got standardization of productivity across the organization and finding those gaps and opportunities and harnessing them. It shows up most manifests itself if you look at the contract labor line, for example. We achieved 2.4% of SW&B for contract labor, which is the lowest it's been since pre-pandemic, nearing pre-pandemic levels, which were in the low-to-mid twos. We've essentially gotten back to pre-pandemic staffing there. Our turnover has come down, our retention has improved. All of that's going to help us to deliver better care to our patients and more efficient, you know, and predictable supply benefits expense throughout. Our benefits team has also worked on overcoming some of the headwinds and inflation and benefits expense as we go into 2026. There's just been a tremendous amount of focus and just day-to-day blocking and tackling execution to make sure we've got the right people in the right place at the right time to do the right job. There's more to come there in terms of all the efforts that Alfred talked about on the revenue cycle side. We've got a great revenue cycle partner with Ensemble Health. They're putting a lot into AI machine learning, helping us to improve our coding, improving our documentation accuracy. Our partnership with Ambience is helping us on the outpatient side with our clinics. There's a lot of things that are moving here that give us good confidence that the momentum that we exited Q4 will sustain and continue to pick up IMPACT, no pun intended, as we go throughout 2026. It's probably too simplistic of a model. If you think about the buckets of opportunity, Marty touched on the SW&B line. We have, of course, supply chain management, which is our next largest bucket of cost. Then Marty mentioned the revenue enhancement improvements. You know, I would think of those in kind of the SW&B as the thing you can attack the quickest, and that's where the preponderance of that $55 million has come from to date. Supply chain is probably, you know, kind of next on average in terms of how quickly you can respond and impact it. Then revenue enhancement improvements like contract renegotiations, those are sometimes, you know, longer term in nature. Overly simplistic, but hopefully a helpful construct. No, I appreciate it. Last point just to add is that this is meant to be a multi-year IMPACT program. This is not just for 2026. As we stare at the BBB and the projected impacts of that in the out years, we're trying to make sure that we're staying ahead of that. All the things that Alfred and I outlined are driving that, and this will be a multi-year journey. You throw AI on top of that, and we expect that there will be more to come in each of these different areas. Yeah. Okay. That's great. I appreciate it. I was gonna try to lift our heads up a little bit and then, you know, and specifically hit on the AI topic. You know, I appreciate one thing that distinguishes Ardent is, you know, your investment into technology, and you've got Epic throughout the system. You've also explained to the investment community some of the interesting things you're doing in terms of scribes and wearables. You know, you mentioned Ambience documentation. Maybe just starting off high level. How does this change the clinical workflow and, you know, the patient experience and ultimately sort of the efficiency that you can drive within Ardent itself? Yeah. I'm very bullish on this. Having been at this for almost 30 years, you know, technology's always been a part of healthcare, but the industry has been slow to adopt where other industries have capitalized. I think AI is gonna be a level set. The tangible proof points that we have right now, you mentioned the Ambient scribes, and a lot of systems are using that. We're able to see, you know, not only a quality of documentation improvement, a better patient-physician relationship, but also improved physician productivity and reduced burnout, which all helps to, you know, make for a healthier system. Patient wearables, and I usually keep one of these at my desk, the BioButton. I've referenced this before. It's a little patch that's about the size of a smartwatch that sits on your chest and is helping us to get better care, help our clinicians to deliver better care at the bedside, which helps our patient safety and patient quality, but it also helps us from an operational efficiency, driving reduction in length of stay, reducing the number of unplanned ICU admissions, which increase length of stay and complications and cost. Those are things. We just announced a partnership with hellocare.ai, which is going to be throughout the system. We've done a pilot on virtual nursing and virtual attending, but we're now expanding it to virtual sitting. We pay people to sit in patients' rooms that are confused or at high fall risk to try to prevent them from getting out of bed and falling or hurting themselves. That's a very labor-dependent activity and not a high-value add. This technology will be watching the patients, and they're gonna be able to do that at scale. We're gonna see a, you know, direct reduction in the cost of labor. Now, we've got to pay for the technology, but we believe that cost savings alone will pay for the technology. Then we layer on top of that virtual nursing, virtual attending. We've kept with our virtual attending program, keeping those lower acuity patients in our primary and secondary level hospitals, which is boosting the census in those areas and keeping our tertiary centers open for the higher acuity transfers that we want to have. We're bringing the specialist to the patient versus transferring the patient to the specialist. When you add these things up, none of these are going to be grand slams per se. It's baseball season, but these are base hits. As we start to put you know runners on base and move them around, we start to score. As we look at this across the portfolio, you know, this clinical transformation is going to allow us to ultimately, you know, hire less physicians because we've got tools that are helping to extend the workforce and, you know, expand panels. It'll help our nurses to do their jobs better so that we can reduce our dependency on contract labor and have other safeguards in place to help our nurses do their job. Ultimately, all these things should be seen as productivity advantages or cost takeouts from the system that is part of our longer-term margin expansion portfolio. Then you translate that onto the business side, and I'd say we're in the very early innings there. Our revenue cycle partner is doing a lot with this, and we benefit tangibly from their investment. We're not having to pay for that investment out of our capital. We see that opportunity to play out in other aspects of the business in terms of reducing the increase in headcount on a corporate G&A basis, as we continue to grow the system. That's great. I know there's a lot of different initiatives underneath the surface there, and you mentioned just a few. Is there any sort of even just a mental model you could give us in terms of how far along this journey you are and, you know, if there's, you know, specific things like Ambience listening, like how far that's been rolled out? Okay Across the portfolio that might be sort of. Yeah Interesting for us to understand. Yeah. On a larger basis, I'll stick in baseball terms, I'd say we're in the early innings. We've done multiple successful pilots that have given us conviction to expand these, but we have not fully expanded them at scale. The Ambience is probably the most mature. We have re-rolled that out to our physicians on the outpatient basis, and so we're seeing the benefit from the clinic side, which is the much smaller portion of our business, but higher, much higher volumes. We will be able to see, you know, some productivity and documentation gains in the near term from that. Across the greater organization, we're still in the early innings with, you know, a lot of pilot projects and good proof points that are giving us the conviction to scale. hellocare.ai with the virtual nursing, again, after that successful pilot, we will be ramping that across the organization, but we'll be wiring up 2,000 beds across the system. It's gonna take us the majority of this year to implement that technology before we really start to see the gains from that in 2027. One of the other opportunities you all have talked about quite extensively is just the ambulatory opportunity across your portfolio, and it seems like, you know, your markets are just less mature from that standpoint in terms of opening up those access points. You mentioned some of the urgent care deals earlier. Maybe just provide a little bit of context in terms of some of the early investments, those early acquisitions you've made, and I'm sure there's others. Just have you started to see that positive downstream impact to the rest of the system as those investments have ramped up? Yeah, most definitely. We said we were gonna start with urgent care because, one, the opportunity was there, and two, it's a top-of-the-funnel patient acquisition strategy. If we look at those early acquisitions, about 45% of those patients that came through, because we have Epic, we can see a lot about these patients, where they're coming from and where they're going. About 45% of those patients coming into the system after that first acquisition were brand new to Ardent, so they'd never been patients in our system before. Now that we've got some maturity under us, we can see that on average about 15% of those patients are having follow-up care somewhere else in the Ardent network within 30 days. When you extend that out to about six months, it's closer to 40%. We are seeing that pull-through that we expected there. Now that was the first step, and we were able to get these urgent care acquisitions in an attractive multiple that would have emulated what it would have cost us to build them, when you consider the capital outlay to build the clinics and then the working capital ramp up to build a patient flow. We acquired 45% new patients for about the same price and, you know, without any time in between in developing those. That was step one. Now we're moving into the more traditional ASC environments or outpatient imaging, freestanding EDs, micro hospitals. Those are gonna have a longer build. Again, just given the multiple differentiation in those lines of business, they're more likely to be de novo builds for us than acquisitions. Not to say that there won't be some acquisition activity along the way, but given the multiple pricing on those assets compared to where we're trading, it doesn't make a lot of sense. We're gonna be disciplined in deploying our capital. Over the next several years, you'll see us putting more shovels in the ground. Last year we started that. We've got two hospital-based outpatient ASCs opening up later this year in two of our key markets. We've got a pipeline of activity that we see will keep us busy for the next several years. Again, in a very, you know, methodical, but, you know, deliberate way, expanding these. The opportunities may not be as great as a huge major metropolitan area, but we do see opportunities to selectively expand in each of these different areas within our core markets. That was always part of the original thesis of going public was just to go deeper into our markets, have more penetration, not only in the inpatient high acuity service lines, but also the outpatient areas where, you know, the business is growing and migrating to. Got it. Let me hit on another kinda key area of future growth, which was your joint venture growth strategy, which we've been very bullish on just 'cause I think there's a great need for that amongst nonprofit and academic systems. Maybe just sort of talk about the benefits that just foundation setting, the benefits that accrue to the JV partner and some of the capabilities you bring and, you know, any update you have on the pipeline. I know these are deals either happen or they don't. It's hard to really predict, I'm sure even from your perspective. Just sort of catch us up on the benefits of this model and, you know, what can you share from a pipeline perspective? Yeah. Well, you're hitting on all three legs of our growth. It's the impact in growing margins, the second is growing our outpatient footprint in our core markets, and the third is looking for that next new market or new hospitals to complement our existing footprint. Last summer we hired a new chief development officer who's been a great addition to the team. Wealth of resources, knowledge, and contacts in the industry. We have been building the pipeline. Now early on, we've said this before to some folks that we were pretty excited. We thought we had an acquisition shortly after we IPO'd that we were going after, and we ended up pulling back after diligence and seeing some things that we didn't like, and we just couldn't get there on a price that felt good to us. We ended up pulling back. I say that just as a reference point that we are gonna be very disciplined in terms of what we go after. We're not chasing new market growth for growth's sake. There's plenty of assets. We looked at probably over a dozen opportunities last year and passed on those because we just didn't see something that looked good. We've got good growth in our existing markets, good organic growth, you know, that we can continue to build off of. We don't wanna make a mistake and do a bad acquisition. But we are seeing better quality pipeline conversations since Chris, our Chief Development Officer, has been here. We've probably got 10-12 different academic joint venture partner conversations happening right now. To your point, Matt, these don't just happen. These take feeding and watering and nurturing to you know, plant a seed and help people understand the concept and then find a target opportunity to go after. We can't just go knock on somebody's door and say, "We're gonna buy you." Having that partnership mentality on the front end, so when an opportunity arises that we're ready to go after that together is what we've been focusing on. Nothing to write home about today, but we feel good about the quality of the pipeline and how it's building, getting our name out there in the industry so people understand what we've done, the track record we've built, for these joint venture partners to your earlier part of the question. Everybody wants to grow, but not everybody has the balance sheet to do it, and not everybody has the integrating and operating experience to do that at scale, particularly when you move out of a core market. So when we partner with an academic, it's generally going into new territory outside of their existing footprint and helping them to expand. We can take advantage of the name, reputation, and the brand that they might have and the strong clinical affiliations and expand that into a new region and help a system out that may have been struggling. For them, they're getting to grow and then have the perceived growth of their network without taking on, again, that capital outlay, that burden, and that execution risk. The partnerships have worked really well, where we've had them and you know, we expect that these will produce fruit over time. Again, we're not in a hurry to do a deal. We wanna make sure it's the right deal. Got it. Let me return back to a topical piece of the story is just, you know, what's going on with exchanges. I appreciated Alfred's comments earlier about detailing some of the assumptions you all have made. You know, I think they're pretty similar with what many of your peers have talked about. I was curious, you know, what are some of the either internal or external data points that you're tracking to try to figure out whether some of the assumptions that you have made are you know, panning out. Then the other question I was hoping to get addressed, I think you guys have done a good job of helping investors understand some of the accounting sort of dynamics at play with the grace period. Just maybe help us think through how, you know, the EBITDA impact from the exchanges may flow through this year given the grace period. Sure. Happy to walk through that. In terms of some of the external data points, you know, I didn't go deep into the fact that we've actually seen growth preliminarily in enrollment in the states we're in now. That's different among our various states. Texas has grown a little. New Mexico's actually grown a lot. I think enrollment's up, like, 14%. The state stepped in with a fairly substantial subsidy as the federal subsidy expired. It's not the same by market. Of course, we don't know at this point who's not going to pay, to your point, Matt, around the grace period, who's not gonna pay their premium because so much of the population is auto-enrolled, and you won't have an appreciation for the magnitude of the increase until their first bill shows up, which has, you know, happened by now, but then has a period of time in which to actually pay, which that grace period covers in the first 30 days, we would be if we're paid for a claim, we are able to keep that payment. From day 31 to day 90, if we're paid for a claim and the member does not pay their premium, that payment can be recouped by the payer from us. You can see that this plays out over time and that we're not actually gonna have visibility in terms of who didn't pay their premium and are we actually at exposure for a recoup, after the end of that 90-day period. Now, this has always existed, this dynamic. It's just that, we believe that we're at risk for an elevated amount of recoups, just given the dynamic of the large premium increases that we've gone through this year. We're working with our revenue cycle partner to identify, you know, just that there are mechanisms where we can at least come up with a, or we believe a rough estimate of who hasn't paid their premium, compare that year-over-year, see, you know, the last thing we'd wanna do is, you know, report, "Oh, everything's great in the exchange market," only to find that, you know, no, a lot of people didn't pay their premiums and had, and we've had payments recouped. Fair enough. Yeah. I think all this requires maybe a little bit more judgment, this year than the prior years. Sure. I think we're just about out of time. I really appreciate you all being here and spending the day with us. Thanks very much. My pleasure. Thanks for hosting us, Matthew. Thanks, Matthew.