Reinvesting in Care: How Novant Health Turned Energy into a Strategic Asset

Summary

Becker’s Healthcare Podcast Summary
Episode: Reinvesting in Care: How Novant Health Turned Energy into a Strategic Asset
Release Date: July 14, 2025

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Introduction

In this insightful episode of the Becker’s Healthcare Podcast, host Lucas Voss engages in a compelling discussion with Alice Pope, Executive Vice President and Chief Financial Officer at Novant Health, and David Kraus, Executive Vice President of Development and Co-Head of Healthcare at Infra. The conversation centers around Novant Health's innovative approach to energy management through the "Energy as a Service" model, transforming energy infrastructure into a strategic asset that supports sustainability, financial stewardship, and operational excellence.

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Setting the Stage: Novant Health’s Shift Towards Sustainability

Alice Pope initiates the discussion by outlining the motivations behind Novant Health’s intensified focus on environmental sustainability and energy infrastructure:

“At Novant Health, we were looking for a long-term sustainable solution to help improve our energy infrastructure that would help us reduce both consumption as well as emissions. [...] the model allowed us to align operational excellence with sustainability and financial stewardship in a way that traditional models have often struggled to deliver.”
(03:50)

This strategic pivot was driven by the need to integrate sustainability into all business decisions, ensuring that energy management supports the organization's broader environmental and operational goals.

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The Energy as a Service Model: A Strategic Partnership

The conversation delves into the specifics of the "Energy as a Service" model and its implementation through the partnership with Infra.

Alice Pope highlights the unique aspects that made this model appealing:

“We retain ownership of all of our assets so we weren't selling our energy infrastructure plants to a third party and we retained all of our team members. So that was really the first point that was so compelling to us.”
(04:20)

David Kraus expands on the significance of this partnership, emphasizing its strategic and innovative nature:

“This partnership has been definitely one of the most strategic and innovative engagements we've been a part of. [...] Novant was able to generate $855 million of capital unlocked from otherwise [...] illiquid infrastructure assets.”
(05:40)

The collaboration stands out as the largest "Energy as a Service" healthcare transaction ever executed, setting a new industry benchmark.

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Financial and Operational Benefits

The partnership unlocked substantial financial resources while enhancing operational capabilities. David Kraus breaks down the allocation of the $855 million capital generated:

• $170 Million reinvested into high-ROI energy conservation measures (e.g., retro-commissioning, lighting upgrades, HVAC optimization).
• $200 Million pre-funded four years of deferred capital needs (approximately $50 million per year).
• $485 Million reserved for broader strategic initiatives across the Novant Health system.

“This structured enabled Novant to unlock significant upfront capital without increasing debt on their balance sheet.”
(05:40)

Alice Pope underscores the multifaceted benefits:

“$170 million that will be reinvested to improve and reduce our energy consumption. [...] $200 million [...] to ensure that we maintain the infrastructure of our facilities which is so key to patient care.”
(10:12)

This strategic allocation not only supports sustainability efforts but also ensures financial flexibility and infrastructure maintenance, crucial for delivering quality patient care.

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A Milestone for the Industry

The collaboration between Novant Health and Infra is portrayed as a transformative milestone in the healthcare industry's approach to energy management.

David Kraus reflects on the partnership's broader impact:

“This reinforces the value of engaging early with the leadership at the health system across multiple functions, understanding exactly what their goals and objectives are and they can better allow us to keep our solution flexible and then we can tailor it to the specific needs of the health system.”
(09:44)

The innovative structuring of the deal, particularly the reinvestment strategy and asset retention, serves as a model for other health systems aiming to leverage energy infrastructure for strategic growth and sustainability.

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Recommendations for Healthcare Leaders

Both Alice Pope and David Kraus offer valuable advice for other healthcare leaders considering similar energy partnerships.

Alice Pope emphasizes the importance of a multidisciplinary team:

“You need a multidisciplinary team to help legal, finance, engineering, operations, strategy [...] to bring that team in early and empower them to really understand and learn the transaction and then really shape the structure.”
(10:12)

David Kraus adds the necessity of stakeholder education and alignment:

“Educate and bring along key stakeholders, especially your board and your executive leadership, because it is maybe unfamiliar communication about the strategy, about the long-term benefits.”
(13:40)

The key takeaways include:

• Early Engagement: Involve diverse teams from the outset to navigate the complexities of the transaction.
• Stakeholder Alignment: Ensure that leadership and board members are well-informed and supportive of the strategic objectives.
• Strategic Vision: Approach energy infrastructure not just as a facilities upgrade but as a strategic financing opportunity that aligns with long-term organizational goals.

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Conclusion

The episode concludes with a recognition of the successful collaboration between Novant Health and Infra, highlighting how strategic energy management can drive sustainability, financial health, and operational excellence within healthcare systems. The insights shared by Alice Pope and David Kraus provide a roadmap for other healthcare leaders seeking to harness energy infrastructure as a strategic asset, setting a new standard for the industry.

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Notable Quotes:

• Alice Pope:
  “At Novant Health, we were looking for a long-term sustainable solution to help improve our energy infrastructure that would help us reduce both consumption as well as emissions.”
  (03:50)

• David Kraus:
  “This partnership has been definitely one of the most strategic and innovative engagements we've been a part of.”
  (05:40)

• Alice Pope:
  “$170 million that will be reinvested to improve and reduce our energy consumption.”
  (10:12)

• David Kraus:
  “Healthcare leaders should definitely be listening more to Alice than to me.”
  (12:21)

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For more in-depth discussions and industry insights, tune into additional episodes of the Becker’s Healthcare Podcast here.

Transcript

[A]

Hi everyone, my name is Lucas Voss with Becker's Healthcare. So great to have you all. Thanks for tuning into the Becker's Healthcare podcast series. Very excited for today's discussion on reinvesting in care. How navant health turned energy into a strategic asset. And with that, I'm very excited to be joined today by Alice Pope, Executive Vice President and Chief Financial Officer at Novant Health and David Kraus, Executive Vice President of Development and co head of healthcare at and for. David and Alice, thanks so much for being here today. It's fantastic to have you.

[B]

It's great to be here. Thank you for having me.

[C]

Thanks, Lucas. Looking forward to the conversation.

[A]

Great to have you both. We'll start with introductions here. Could each of you introduce yourselves and just share a little bit about your background and your roles? Alice, we'll start with you.

[B]

Sure. So I am, as you said, the CFO here at Novant Health. I've been here for about 14 months. I've had the pleasure of working at other healthcare systems in my past and that includes stents in the Northern Virginia area, Arizona and East Tennessee. And just very excited to be here with you today.

[A]

Thanks, Alice. Nationwide experience. We love it. David, over to you.

[C]

Yeah, thank you again for having me. I'm David Krause and as you noted, executive vice president and co head of our healthcare team here at Infra. It's a little background. I spent my entire career supporting non for profit healthcare. Actually began at bank of America, Meryl lynch in healthcare investment banking, really helping health systems manage their capital structure and access the public markets. And I've now been with Infra for four years where I lead the development and execution of energy as a service partnerships across the country. And at Infra really oversee everything from early diligence through execution, ensuring that our solutions are both financially sound and operationally impactful. So that means working closely not just with CFOs like Alice, but also with engineering facilities and sustainability teams. And in this case it's been really an absolute privilege to partner with Alice and the Novant team on what we believe to be a model defining partnership for the industry. So looking forward to digging in a little bit today and discussing it.

[A]

Yeah, very excited. Before we touch on that partnership, I think we have to set the baseline a little bit for our audience here. Alice, what was happening within Novant Health that led to a more intentional focus on environmental sustainability and and energy infrastructure?

[B]

At Novant Health, we were looking for a long term sustainable solution to help improve our energy infrastructure that would help us reduce Both consumption as well as emissions. And we were really impressed by the Energy as a Service model because it's innovative and aligns with our goals, builds on our environmental sustainability initiatives, which we integrate into all of our business decisions. Ultimately, the model allowed us to align operational excellence with sustainability and financial stewardship in a way that traditional models have often struggled to deliver. So we were excited about this model and the approach and how it really aligned our deep operational expertise of our teams with the INFRA team to really develop and enhance our sustainability goals.

[A]

Yeah, and David touched on this a little bit in the introduction there. It's really being seen as sort of a milestone in the Energy as a Service model in healthcare, really your partnership itself. And you touched on this a little bit here in your previous answer. Can you talk a little bit about why this model stood out for you from a more traditional energy infrastructure investment in itself? And again, that partnership with Infra, why that was so special and how that really influenced this as well.

[B]

I think for us, one of the early factors that allowed us to continue the conversation was that we retain ownership of all of our assets so we weren't selling our energy infrastructure plants to a third party and we retained all of our team members. So that was really the first point that was so compelling to us and again allowed us to take the next step in this fairly long process of understanding what this relationship could, where it could go and where it could take Novant health. That was probably very key early on.

[A]

David, again, this is so interesting to hear from the perspective of the health system itself, from Elsa's perspective too. I'd love to hear your thoughts on this as well. Again, this is such a milestone project. Why is this setting new standards from your perspective, why is it a milestone? And what made this partnership unique from your perspective, from enfra's perspective. And can you touch on some of those strategic and operational benefits that Alice has already mentioned?

[C]

Sure, absolutely. And maybe even before that, just to add and follow up on some of Alice's responses. I would say from our perspective, what really stood out to us initially was how aligned Novant was across leadership from Alice in finance to her operations team around the overall importance of upgrading their energy infrastructure in a way that wasn't just reactive or, or compliance driven, but Alice and her team really saw energy as an overall lever to support broader capital planning, long term resiliency and sustainable sustainability goals. As, as Alice, as Alice stated, and this strategic mindset was really important and really created, I would say, a strong foundation to allow for this program to succeed and really allow this program to evolve in what we're calling, you know, a milestone transaction. So then, you know, why is this such an important transaction for us and for our industry? Yeah, I would say this partnership with Novant has been definitely one of the most strategic and innovative engagements we've been a part of. And not just because it is the largest energy as a service healthcare transaction ever executed, but I would say more so because of how intentionally Novant applied the model to support their long term goals. And I think we can dig in a little there. But you know, like all infra partnerships this structured enabled Novant to unlock significant upfront capital without increasing debt on their balance sheet. That's a foundational part of our solution that's been accomplished in all of our partnerships. But what stood out in the case of Novant was how they chose to deploy that capital. So breaking that down a little bit, Novant was able to generate $855 million of capital unlocked from otherwise and I would say previously looked upon illiquid infrastructure assets. So of the 855 million generated, Novant chose to reinvest 170 million of that across the enterprise into high ROI, energy conservation measures, and just to name a few things like retro commissioning, lighting upgrades, H vac optimization and upgrades, and many others beyond that. So that was. Of the 855 million, 170 million went towards those purposes. The remaining 685 million was placed directly on Novant's balance sheet. Of that 200 million was used to pre fund four years of deferred capital needs. So roughly $50 million per year. And then the remaining 485 million was reserved for Novant's broader strategic initiatives across the system. And I would say for us, the idea to proactively allocate funds for future capex after the close of the transaction, giving the health system control and flexibility and really breathing room was something that Alice and her team brought to the table. And now that's a new concept for us and it's really influencing how we design and structure similar programs for other health systems. So I definitely want to take a moment to recognize Alice's leadership and thank her for their innovation because it's really pushed us to continuing to improve our model and rethink how we think about it and apply it to other organizations. So yeah, I would say kind of to round that out. You know, from our perspective, this really reinforces the value of engaging early with the leadership at the health system across multiple functions, understand exactly what their goals and objectives are and they can better allow us to keep our solution flexible and then we can tailor it to the specific needs of the health system.

[A]

Yeah, and it comes back again to what you mentioned earlier. It's really that strategic lever enabling so many different areas within the organization, enterprise wide that's so important. Alice, I'd love to ask you this as well in terms of what this means for other healthcare leaders. Right. For other teams across the country. What should healthcare leaders be thinking about if they want to pursue or scale energy partnerships like this? What are some of the things that you would recommend?

[B]

Well, first of all, I think that you need to bring in a team early on to engage and understand this transaction. It is a complicated transaction and so you do need a multidisciplinary team to help legal, finance, engineering, operations, strategy, you know, to bring that team in early and empower them to really understand and learn the transaction and then really shape the structure. Because these, these can be flexible transactions. And also I think if we think about what David just shared, what's so exciting about it is you know, the transaction was $855 million, we've established that. But if you think about the three buckets, so $170 million that will be reinveste to improve and reduce our energy consumption. So that checks the box for sustainability. And I think that health leaders should feel good about that. We all need to do our part to reduce energy consumption. The 200 million. I think we feel very good about having that money set aside to ensure that we maintain the infrastructure of our facilities which is so key to patient care. And then of course the balance of funds is really pretty exciting for Novant Health to help fuel our growth. You know, we've been very public about our plans to grow our organization and our aspirations and that access to capital can be very helpful as we move along that growth plan.

[A]

Yeah, David, same question for you. Hearing what Alice just shared. What's your recommendation for healthcare leaders? What should they be thinking about?

[C]

Yeah, well, healthcare leaders should definitely be listening more to Alice than to me. So not gonna try to do better than her there but so yeah, I would say high level it's gonna be similar but you know, the opportunity here isn't just about energy savings. I would say energy savings are the engine in the car. It's needed to make the solution work. From a financial perspective. It's important as Alice stated from you know, reducing your energy consumption, you know, that's what and for gets out of bed every day thinking about is how do we make investments to reduce energy consumption. But it's not just energy savings. And that's because of how Novant looked at the transaction. It's about capital, it's about flexibility, it's about unlocking value from infrastructure assets that have historically been viewed as illiquid. And if you approach this not just as a facilities upgrade, but more as a strategic financing opportunity as well, it really opens up a very different kind of conversation. One that can support systems, operational and financial goals at the enterprise level and again can really and really structure it to a way to meet not just facilities and energy objectives, but other system wide initiatives as well.

[B]

And if I could add an additional point, I think a health system leader that is is considering one of these transactions, I think it's going to be very important to educate and bring along key stakeholders, especially your board and your executive leadership, because it is maybe unfamiliar communication about the strategy, about the long term benefits and really spending some time up front with your peers and your board so that they understand the transaction. Because you know, there's been Energy as a service deals that are very different from this one. This one is unique, innovative and exciting. Again, it goes back to my first point that we still own all of our assets and all of our team members who are so important to Novant Health are still Novant Health team members. And that's a little different from Energy as a service deals from 30 years ago. So I think it's just important to spend that time upfront, understanding the transaction and educating those key stakeholders.

[A]

Yeah, and you both touched on the importance of alignment I think is very important and being able to have that communication internally and align teams to make this as successful as possible. David and Alice, thanks so much for your time and great discussion today. Great points. Thank you for being here. We really appreciate it. Again, thanks for being here.

[B]

Thank you. It was great to be with both of you.

[C]

Thanks so much. Appreciate it.

[A]

I'd also like to thank Infra for sponsoring today's episode. You can also tune into more podcasts from Becker's Healthcare visiting our podcast [e-mail] and I do want to highlight our previous episode on Rethinking Energy Strategy. With Infra, they're talking about delivering financial and infrastructure solutions to healthcare systems in that episodes with a lot of great insights. Make sure you tune in to that.