← Becker’s Healthcare Podcast
Becker’s Healthcare Podcast
Reviving Community Hospitals and Rethinking Healthcare M&A with Radha Savitala
00:17:59
Loading summary
Transcript18 lines
- [00:00]
A
This is Alan Condon, back with the Beckers Healthcare podcast. And today I'm delighted to be joined by Arada Savitala, the founder and CEO of Tenor Health Foundation. Radha, pleasure to have you make your debut appearance on the Becker's podcast today. For those of our listeners who mightn't be as well acquainted with yourself, Tener Health foundation and the work that you're doing, do you mind giving us a little bit more background about your role as CEO of the company?
- [00:28]
B
Absolutely. Thank you for your time, Ellen, and your interest in myself as well as Tanner Health Foundation. Really appreciate it. By background, I am a healthcare attorney. I've worked on over 45 acute care acquisitions in my career, as well as other medical groups, surgery centers and the like, and several other financing transactions. So really a lot of familiarity with not only health care mergers and acquisitions, but having worked with a lot of turnaround experts, really was able to appreciate all of the operational expertise as well as contracts and reimbursement. So with this knowledge, a few of us got together that have worked on a national scale for both nonprofits as well as for profits, and who possess the healthcare expertise to turn around financially distressed hospitals. We founded Tenor Health foundation and completed our first acquisition in January of this year, 2025. And it was a closed hospital. And so shortly thereafter we reopened the hospital and have been operating it since.
- [02:00]
A
Got it. I believe that is Sharon Regional. I believe a recent name changes. That's the hospital in Pennsylvania, correct?
- [02:07]
B
That is correct. It is in Northwest Pennsylvania. Sharon Regional Health System.
- [02:13]
A
Got it, got it. So fantastic experience. Obviously a healthcare attorney like you said. I believe 40 plus transactions you've been involved in or throughout your career. I think very challenging time in the healthcare landscape in today's day and age. But I guess that comes with a lot of opportunities as well. You talked a little bit about it in your intro there, but can you maybe expand on what inspired you to launch Tenor Health Foundation? And how does Tenor's mission differ from some of the traditional healthcare investment or advisory models we see out there today?
- [02:47]
B
Well, you hit the nail on the head, Alan. There's a lot of challenges in healthcare today and every year we have seen year over year a increase in hospitals at risk of closure nationwide. Many of these hospitals are rural, designated by the centers of Medicare and Medicaid. But we've also seen the rise and fall of the traditional for profit models. The market as it currently stands has, has the large health systems, but also as you as you know, a lot of the academic tertiary centers have, have really received a lot of the market share. And so what we have seen, and this is the reason why we created the nonprofit, is the ability to work at a multifaceted level with not only local municipalities, but state legislatures, foundations, to bring all of the stakeholders together to truly make it a local market for healthcare. The traditional notion of dots on a map and just acquiring hospitals really doesn't make sense. You really have to have the market focus to be able to achieve the economies of scale that are necessary for recruitment, supply chain, labor costs, managed agreements. And so that's why tenor has been created, because we have individuals, again, that have done this nationally and have seen the pros and cons. And so truly creating the local, community stakeholder driven model has proven to be successful for Sharon Regional as well as others who've done it. And we're quite proud of the achievements to date. For Sharon Regional. We've seen a lot of milestones.
- [05:00]
A
Yeah, yeah, I guess. Just a quick follow up on the big achievement so far. Like you mentioned in your intro, in terms of reopening Sharon Regional Health System, I believe it's, it's recently rebranded as in the second quarter this year. Pennsylvania, obviously a market in which you're, you're looking to acquire a couple more hospitals, but unfortunately, Pennsylvania seems to be the state that has the most hospital closures than any other state in the country over the past couple of years. Any perspective in terms of why Pennsylvania is seeing maybe these financial challenges a bit more acute than other states? And on the other hand, I guess to your point, a big opportunity for hospital operators like Tanner to come in and turn some of these financially stressed facilities around.
- [05:45]
B
Right. So I think the reason for the closures, specifically in Pennsylvania is several factors, including the fact that Pennsylvania does have a higher number of hospitals than other states. That's number one. Number two, the acquisitions that took place probably a decade ago to 15 years ago, we've seen just these systems pay too much for these acquisitions. And so once that rate of return was achieved, there's just been a lot of divestitures and a lot of exits. Not to mention Medicaid in the state is not the greatest in terms of reimbursement on the acute care side. They do have good reimbursement on the behavioral health side, but just Medicaid alone cannot sustain these hospitals. And so you really have to look at the patient mix and ensure that you are negotiating contracts that accomplish the goals of staying local. Really look at the service lines that can be sustained by that community and that local healthcare Market has to be there again, when you have the market share, you can achieve your economies of scale and negotiate a little bit more favorable managed care agreements to offset the Medicaid. But really you have to have hands on leadership that understands the whole picture and health of the hospital and the community.
- [07:22]
A
Yeah. Radha, shifting gears a little bit, kind of hone in on hospital MA trends. I think this is particularly interesting given the context of last week when we saw President Trump revoke an executive order on competition. I believe 2021 during the Biden era essentially potentially reduced red tape, less scrutiny on mergers and acquisitions across industries, including healthcare. But I guess with that in mind, what hospital MA trends do you expect to gain traction over the coming years? And what do you think we might see a little bit less of, perhaps?
- [07:56]
B
Well, I think given what came out of Washington under this new bill here, I'm not sure that, you know, there's, there's a lot of systems that, that are willing to commit a lot of resources to acquisitions. I think we have to keep that in mind. Even during the Trump administration In the late 2018, 2019 times, we did see the FTC crackdown on some of these acquisitions. So I think they're still going to be mindful of competition. Having concentrated system within a certain geographic area has proven to impact negatively on that, on that community. Higher costs of care, lower, lower quality, things of that nature that you just cannot ignore even though this executive order has been revoked, so to speak. So I still think that we have to be mindful and communities really have to advocate for themselves about, hey look, we need two hospitals, we need competition because not every single community member wants to go to a tertiary academic medical center. The long wait times, the need to wait five, six months before you're able to get a primary care appointment. Equipment just doesn't work for them anymore. So I think they're going to be very much on the alert when it comes to reduction of services in their, in their regions.
- [09:36]
A
Yeah, it's unfortunately something we're seeing a bit of a significant spike in across the country on the back of one big beautiful bill recently signed. And there was impending cuts coming down the line in relation to Medicaid, potentially the ACA as well. But I digress. Radha, you kind of touched on something that kind of ties directly into my next question here. So in terms of today's climate, you touched on many of the challenges we're seeing really across the hospital landscape. Rising labor costs, shrinking margins, some of those impending Medicaid and ACA cuts like I Mentioned likely. To your point, health systems are going to think harder about taking on maybe financially distressed hospitals or assets. But are there still compelling reasons to pursue aggressive acquisition acquisition strategies in the modern climate? If so, maybe. Where?
- [10:24]
B
I mean, I think, you know, I, I don't know that I would categorize it as aggressively pursuing acquisitions, but I do think that financially distressed hospitals, at least, at least some of them do have value to pursue. Those. Those hospitals that still have the, the comprehensive services and a wider primary service area still need to be preserved to the extent that you have the correct volumes. I mean, if volumes are historically low, it's going to be harder to justify, especially if in the region there's other hospitals that can adequately service this patient population. So I'm certainly not saying that every single hospital has to be saved. But to the extent that you have that better patient mix and wider service area, what you really have to look for is the ability to provide these services at a lower cost, quote, unquote. And what does that mean? That means you have to look hard at your debt structure. You have to look at your staffing, because if you're cutting staff, you could potentially be cutting your ability to take more patients too. Right. Many states have the, the patient ratios that you have to adhere to, so the traditional notion of just cutting and reducing pores just doesn't work. So you have to look at every single department and ensure that you're operating effectively and efficiently. And again, strategizing with the managed care companies is also very important. Many times you'll find that managed care entities will want to work with these independent community hospitals because paying more for a larger academic tertiary center is more cost out of the managed care plans pockets. And so you just have to be diligent in the way you negotiate and ensure that you have your finger on the pulse. It's just so important. But I think looking at the right market to ensure that you have market shares, important. Pursuing independent hospitals when you don't have a presence in the state is, is much tougher than it used to be in the past.
- [13:00]
A
Yeah, it's so interesting. It kind of aligns with. I had Prime CFO Steve Aleman on the podcast recently after their recent acquisition of several Ascension hospitals in Illinois and the quote unquote market cluster present, I believe you said, was so essential to Prime's entry into a whole new state, a new market. Turn around some of those financially distressed facilities and potentially look for other opportunities to grow in a new market as well. Tenor Rada has acquired one facility, done A fantastic job in getting it back open back up and running in Pennsylvania. Now, a couple others in the pipeline. Can you share, looking ahead, maybe three to five years, kind of what's your strategic roadmap for tenure? Kind of. Where do you see the, the nonprofit growing? What's your kind of strategy there?
- [13:50]
B
Yeah, I think, I think the strategy really has to be what we've been focusing on already at Sharon Regional, as well as these other acquisitions that we have in the, in the pipeline, primarily the two in the, in the Northeast that, that became public. We don't have any other acquisitions in the pipeline currently. But, you know, three to three to five years from now, what we envision is the hospitals under tenure be a stable and vital community asset that continue to work in partnerships with the FQHCs, with the health plans, and really strategically partnering with other providers or health systems to ensure certain market lines, service lines that can align nicely if others can provide the same services for our community at a lower cost or more efficiently and effectively than Tenr can, Certainly we're willing to partner with them. For example, we're looking at interventional cardiology at Sharon Regional and partnering with another health system for that service line. We're also looking at oncology with yet another health system to bring those services to our community. So I think these sort of strategic alliances at our current hospitals, and then if we look further ahead to the extent that it makes sense and we can diversify enough and still have a market share, we would like to enter other markets. And with the same notion of being responsible in the acquisition structure and price as well as debt. As we've seen, having that heavy debt and paying too much for hospitals in the traditional model or in the private equity space just haven't worked. They haven't worked for financial reasons, for community reasons, as well as a lot of backlash from the government and regulators. And so being responsible will yield results from a quality standpoint, from a patient safety standpoint, as well as a stability and financial standpoint standpoint for our system.
- [16:13]
A
Right. So the quality, the patient experience, patient satisfaction is there. No doubt that will hopefully lead to some of those financial returns and help turn around some of those facilities. Last question, Radha, before I let you go, very generous with your time. I know you'd mentioned, I know you're very focused on the immediate goals, the challenges at the moment. You'd mentioned potentially moving into new markets down the line. Would those markets be adjacent to Pennsylvania or even potentially further afield in different parts of the country? I know don't want to get too far ahead of myself here, but just kind of curious about what you're thinking there.
- [16:48]
B
I think we are open. I mean, to the extent that, you know, there, there exists an opportunity with appropriate market presence and the ability to achieve economies of scale, if that makes sense. Closer to Pennsylvania, certainly we will look at that. I'm a little bit hesitant to move so far away, you know, into maybe even across the country. But again, if that works from a market perspective and we can have that stability, be part of the vision and the strategic alliances, certainly we would look at that. But I think we really need to ensure that wherever we go, the principles and the mission of Tener Health foundation remain the same.
- [17:41]
A
Yeah, absolutely. Rada, so greatly appreciate your time and fantastic achievement so far and what you've done. No doubt some really great things to come with tenor as well. Thank you so much for taking the time to join the Becker's podcast and look forward to catching up with you down the line.
- [17:55]
B
Thank you very much, Alan. Really appreciate your time as well.