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Joey Wahler (Host): It is an ever-changing landscape, so we're discussing healthcare leadership during an era of uncertainty. Our guest is Matt Heywood, he's President and CEO of Aspirus Health. This is the Healthcare Executive Podcast, providing you with insightful commentary and developments in the world of healthcare leadership. To learn more, visit ache.org. Thanks for joining us. I'm Joey Wahler. Hi there, Matt. Welcome.

Matt Heywood: Thank you. Hi, Joey. Nice to be here.

Host: Great to have you aboard. We appreciate the time. So first, in a nutshell, how would you say the healthcare climate has changed from one of more modernization to now facing lots of that uncertainty that we mentioned?

Matt Heywood: When Aspirus and I started together back in about 2013 and through about first 20 years of my career, we would probably say today that healthcare has been more in a moderation era. That was an era post the DRG implementation in Medicare, where we had relatively low inflation. We had moderate growth in our country, and we had moderate labor and supply costs. And during that time, many of us as executives grew up and it was a pretty stable environment for about those 20 to 25 years.

Since COVID in about 2021 to '22 range, and following COVID, the labor crisis, the spike in inflation, and now the challenges that we see with the changes in the government healthcare programs that are coming, we see these as probably once in a lifetime Black Swan events, and that's like four or so in a very short period of time. And we see that this is not going away. And so, we're calling this new era more of the tumultuous era, where in the next we think 15 plus yours as far out as you could see in today's world, that there's going to be a lot more volatility in inflation, a lot more volatility in the labor workforce, and as you could see in the governmental programs. And all that volatility is I think impacting healthcare systems a lot more than they've ever been impacted. And we have a lot of fixed revenue base, and our commercial side has actually been shrinking over these last 30 years. So, we have a very limited commercial base with which to try to deal with some of these changes. And the rest of our fixed cost structure is actually flatter going down. So, this is going to be, I think, a very different time in healthcare. And it's not going to be a short term period. It's going to be, we believe, number of years going forward.

Host: And so, that being said, to deal with this tumultuous climate, as you put it, how do you establish both the processes and the fellow leaders needed to take on those challenges?

Matt Heywood: Well, the good news is I believe that some of the abilities that I've developed through my 30 years were valuable in the post-world, but are even more valuable in this world, which is I strongly believe in having processes, structures in place with good leaders that allow those leaders to then flourish and be able to flex and adjust to the environment. But they have the processes and structures and the development in which to do that in. And in this tumultuous era, that is really the basis of what you need. You need to have strong board governance, strong governmental processes, strong leadership structures and processes. And then, you have to have the right leaders that understand those processes and work within those processes so they can deliver the very fluid and agile outcomes that you're going to need in this more tumultuous environment.

Host: So, you mentioned the importance of sticking to your core leadership values. How would you best describe what those are?

Matt Heywood: I would say everybody has their mission, vision, and they have their values. We work very hard with our mission, vision, and values to reiterate those every day. And then, we try to pick a value that we want to focus on. And make sure the team is focusing on that value. And then, we are actually trying to make sure people are clear on what competencies, what leadership behaviors are needed to exhibit those values. And then, we're talking about what do you do to activate yourself to actually exhibit those values and deliver on those values. And it's a chain that you got to have. You can't just have a part where you say, "We have the value of accountability." Well, okay, you want to be accountable, that's a value. What competencies as a leader do you need to have to achieve that accountability? And then, how are you activated as an individual to deliver outcomes in an accountable manner? And we work very hard on making sure we identify those, reiterate those, and link to those. And we try to identify leaders who exhibit those linkages and who help develop other leaders with those linkages.

Host: Of course, one of the goals in implementing all of that is growth while doing all the aforementioned, what are the keys to assessing and then seizing growth opportunities as they pop up?

Matt Heywood: Aspirus has actually gone from 600 million to about 3 billion in size since I've been here, and about a billion and a half of it actually came in '21 through '25. So during this most tumultuous time, we've actually doubled in size, and I believe the reasons for that were when you have that foundation of the governance, the processes, the right leaders with the things we just talked about, you position your company to be strategically available to take advantage of the opportunities this tumultuous era is going to present. Some organizations, and we talked to a number of people in '22, felt that inflation was transitory, didn't have the foresight to see some of the changes coming. And said, "Well, we'll just rely on our balance sheet. We'll have them 1% margin, we'll lose a little bit of money." And then when they realized that the things weren't transitory and that it was more permanent, they're slow to respond and they're a year or two behind the curve.

In order to be able to grow during times like this, you need to have foresight and actually be identifying the challenges right away, like we did in '22 and implement change immediately, so you protect your balance sheet, you maintain your income statement, and you maintain your ability to keep your wherewithal to take on opportunities when they present themselves. That then enabled us to take on an acquisition with Ascension of seven of their hospitals in our market. We were able then to recently partner with St. Luke's in Lakeview in Duluth, in Minnesota. And all those were organizations that are not doing well financially, had gaps in leadership, had gaps in IT systems. So, you needed to have a strong, rigorous process and team to then be able to not only have the wherewithal to be able to financially take on one of those acquisitions, but you needed to have the ability to then turn them around.

An example of that is we took on the seven Ascension hospitals, they were losing thirty to forty million. Their net revenue was $350 million. Within two years, they're now making $600 million in net revenue, and they're making forty to fifty million profit a year. And that's due to all those processes, leadership and things we've talked about to enable that ability to acquire them and then turn them around.

Host: So to accomplish things like that, in order to build the teams needed behind that, what do you look for in today's leadership talent and how would you say it might differ compared with what was being looked for when you were climbing the ladder years ago?

Matt Heywood: I would say when I first started, the environment was, as we said, more moderate. And you really leaned in on the ability to network. You really leaned in on the ability to be a community advocate, to serve the community, and you leaned in a lot on the skills of working with people and building relationships with people. And you had a little bit more time to lean in on those aspects because your financial stability allowed you to make a modest margin, and you didn't need to have some of the skills of finance, didn't need to have as much the skills on business acumen. You didn't need to have skills on strategic thinking as great, and agility and changing the way you were doing things and coming up with creative ways to solution things. You didn't have that urgency and that need to spin cycle some of the changes that we do have to deal with now in the tumultuous era.

I, fortunately, worked in banking for three or four years before my MBA program, and fortunately got a chance to work in consulting where I got some of those skills. They weren't necessarily as utilized before the tumultuous era. They were utilized, but not at the level they are today. So, the takeaway is that in the tumultuous era, you need to have those softer skills that healthcare has historically prided itself in. But you got to also have that business rigor. You got to have that financial understanding, that business acumen, the agility to change and pivot, the agility to see strategy down to operations. You got to have a lot more of that, that business side of healthcare in order to be able to deal with some of these tumultuous changes. And quite frankly, healthcare's changed over the last 30 years. You look at the size of the concentration in healthcare industry, it's gone from a lot of fragmented, smaller systems to multi-billion dollar companies, and the multi-billion dollar companies require some business sophistication. So, I do think that's what's changed.

Host: With Aspirus Health, being a leader in rural care and enjoying so much growth as you've touched on, what are a few of the recent and current projects that you're most excited about?

Matt Heywood: Actually, I don't know if it's an exciting thing, but I'm actually very proud of. Again, I don't think building a building, doing an expansion, I don't consider that to be something that is really that tough to do. For us as an organization to have had the foresight to two years ago to realize that we would be having what we call business adversity risks start to pop up during this tumultuous era, and for us to really proactively position our organization to become fiscally more successful and to have a plan to deal with these business adversity risks that we saw coming. We saw changes in governmental regulation, reimbursement, litigation. We saw issues with regards to more union activity. So, we saw this world changing and positioned our company two years ago to be more prepared for the world we saw coming. So when I'm hearing about these Medicaid changes, which I believe are more and more likely to come, our organization and many companies are looking at upwards of a 15% margin change over the period of those Medicaid changes, just those Medicaid changes alone, coupled with maybe some of the ACA changes that are going to hit the healthcare industry. So that means between now or five years, somewhere in that zone, if those changes go into place, an organization could have a 15% margin impact if they're not prepared and they need to deal with that immediately and get on an action plan to correct for it. We are already two-thirds of the way there and already have planned to deal with two-thirds of that impact and are on path to work on getting that remaining one-third of impact of these upcoming Medicaid changes.

To me, I'm proud of that because we had the foresight. I'm proud the team actually didn't wait until the problem came to our doorstep. We got on it. And I'm proud that the team is not worrying about what happens in Washington when it comes to making sure we care for our patients and our communities. We have a plan to do that through thick or thin, or for better or worse. So, I'm really proud of that foresight and how we put it to action.

Host: So, you're talking there about the importance of preparation and foresight. Couple of other things that brings us to your motto, the Aspirus formula, growth with purpose. Sounds very catchy, but what's the meaning behind that?

Matt Heywood: For us, the meaning is we will not grow just to get bigger. We aren't going to just grow because it's the thing that everybody says you have to do. Because I know when I first started this journey back in 2013, there was a lot of literature that says, "If you aren't this big, you're not going to be able to stay independent, so go find a friend." And my argument was, size is relative. Can you deliver the strategic care to your communities at a high quality, consistent manner and deal with these changes that come from the environment that we're in. And at that time, the environmental changes were moderate. Now, they're becoming very severe. And size does make some difference, but size isn't the only indicator of your ability to succeed.

So, what we want to do is be prepared, always have foresight, make sure our organization's successful, so as these shocks happen in the tumultuous era, if another party, another organization is not as prepared, is not as able to get through some of these changes, we can say to them, we have these skills, these capabilities we could bring to bear, to add value to your organization. And we see a mutual benefit for us both to succeed in this more tumultuous environment together. And we are looking for those partners and we are prepared for those partners. And if the right one comes along, then we will consider that partnership. And if it's not right, we will walk away. And there's been some partnerships that we have chosen to walk away from. They just weren't the right partnership for a variety of operational or strategic and cultural reasons.

Host: We've talked about processes and leadership, talent, and also preparation and foresight. So in summary here, Matt, overall, what would you say the future holds for Aspirus Health?

Matt Heywood: I would say that the future's going to maintain its tumultuous nature. I would say that we have to control what we can control, which is using our foresight and our other values. To ensure that our organization is doing everything we can to be able to grow, maintain a low cost, high-quality organization for our communities and our patients, and be the place for our leaders and our staff to work at with pride, and be able to attract people that want to come to a stable, high-performing organization and have that pride in that organization.

And then, within that environment, we should be able-- it's not going to be easy and nothing's ever given-- but hopefully, we'll be able to then deal with a lot of these changes in the tumultuous nature and be able to get through it. And then, if there's other parties who struggle to get through it, hopefully partner with them and continue to grow and expand the capabilities of Aspirus so we could share it with other communities and other patients.

Host: Well, folks, we trust you are now more familiar with healthcare leadership amid uncertainty. Matt Heywood, continued success with navigating through these tumultuous times. And thanks so much again.

Matt Heywood: Thank you, Joey. I appreciate the opportunity to talk with you and all the other individuals that listen to this.

Host: Same here. And for more information, please do visit ache.org. If you found this podcast helpful, please share it on your social media. I'm Joey Wahler. And thanks so much again for being part of the Healthcare Executive Podcast.