Transforming the US Health Care System from the Ground Up

Speaker A: Hello everyone and welcome to the Sustainable Finance Podcast. My name is Paul Ellis and I'm your host for these programs about developments in this fast growing industry. The U.S. health care system is under siege, financial distress and rising frustration and dissatisfaction by the public, to name just a few challenges. My guest today is leading the way to a different approach. Rob Roy is senior Vice president, Chief Investment Officer and co head of environmental sustainability for Advent Health, a non profit health care System which employs 3,800 physicians and provides health care services to over 8 million patients through 52 hospital campuses in nine states and and 22 home health and hospice agencies. Rob, who has 36 years of institutional investment experience, oversees Advent's health investments which include operating capital and employee retirement portfolios totaling approximately $20 billion. Hello Rob, and welcome to the Sustainable Finance Podcast.

Speaker B: Hi Paul, thank you for having me and Happy New Year.

Speaker A: Happy New Year to you. We've been looking forward to this program. Uh, Mike Wallace of, uh, Persephone told me that we should definitely be working with you early in the new year. And so we're going to jump right into the questions. Unless you have anything else you wanted to say to begin.

Speaker B: No, that's very kind. Thank you to uh, the team and I'm looking forward to this conversation as well. Thank you for having me.

Speaker A: Great. So let's get started. The US Health care system, as I said, is under siege, financial stress and rising frustration, dissatisfaction by the public, to name a few challenges. Tell us how Advent Health's sustainability journey is leading the way to a different approach.

Speaker B: You know, you focus on the attack that the healthcare system is possibly feeling, but I think more broadly it's pretty easy for all of us to feel that the world is broken and not getting better all on its own. Most people, I'd say everyone that I come in contact with, really wants to be a part of the solution. We all try to find ways to make the world a better place in terms of how we treat each other, in terms of how we act around the issue of environmental sustainability. Many people are trying to find things that they can do that will help to be a part of the solution. But even when we do all the things that we can think to do, we never quite feel like we're saving the world all on our own. And we want to make a bigger impact. And so employees, communities, they want to create this network effect of working with each other. Um, people want to work for firms that uh, align with their interests and are trying to do something better. And so throughout all of this, Advent Health has looked at the issues around environmental sustainability and the impact that we're having on the world and saying not only can we find ways, uh, to do our work in a better way, but we can engage our employees and we can engage our communities in this constructive work and this network effect. And through the success of doing that, we can engage other companies. And collectively what we're going to end up doing is solving some of these issues that are facing the healthcare system today.

Speaker A: Okay, well, I'm really glad to hear that you're reaching beyond your organization's, uh, parameters. Um, how does environmental sustainability align with your organization's mission and values?

Speaker B: Yeah, our mission statement is extending the healing ministry of Christ. Our, our sacred responsibility is to care for those in our communities, uh, beyond just excellent medical care, which is sort of table stakes for being in this business, but to do it in a loving way that allows that care to flow and have a greater impact. And when you think of that, the very tip of the spear, ah, as you might say, is the caregivers that are touching the patients. But behind that moment of, uh, one on one care that a patient's receiving is all the different ways that we get there. So we think about having a beautiful mission. That's great, but there's how you put that together. And so when we start to look at all of the ways that we go about doing our business, we begin to find that there are negative impacts that come from the way that any business operates. But those negative impacts can also be thought of in a positive way, which is that it gives you these opportunities to think creatively about how can we do our work in a way that's both, um, environmentally accretive, financially accretive, and adds to the care that we have for our communities. And when you begin to think in this sort of creative, problem solving way, what you find is while you're meant to be a blessing to your communities, there's a whole array of new opportunities that you have to be an even broader, um, set of blessings to the communities in which you operate. And so that's become a big focus for us.

Speaker A: Okay. Now Rob, you've had extensive experience throughout the financial services and investment industry. How are you balancing the need for operational efficiency with the commitment to environmental stewardship? This is a big issue for a lot of companies and nonprofit organizations, quite frankly, especially, especially the larger ones like yours.

Speaker B: Yeah. So clearly the things that are never going to be, uh, in question when we're doing this work is, uh, patient safety, patient experience, and the love and care that we provide for the people that come under our care. Right. So that's always going to be um, uh, a base. Right. Like we're never going to touch at that. Now we've got this question of like, how do we implement environmental sustainability and operational efficiency? You know, I've spoken with many executive groups who, who see this work and think, well, I don't know how we would ever get there. Healthcare is very complicated, it's very expensive. I don't know where we're ever going to get the money to do this and I don't know how we're ever going to solve it. Our experience has been slightly different, which is that we saw the need to get after it, we saw the importance of the work. And what we said is, let's create a team of people who have the uh, license to work throughout the organization and to think creatively about what are the issues, what is the measurement of the impact that we're having and what are the potential ways that we might be able to solve that. And through that creative problem solving, once you understand the problem well and you can find things that are both financially and environmentally accretive, those are always going to get a yes from us. And it's been remarkable to see the number of times that we've looked at issues, we've thought about them in new ways, saying, of course the care for the patients is always the most important. That's never going to come off the table. But if you start there and then you have this opportunity to think creatively about these solutions, the number of times that we're finding opportunities to do our work, uh, in an environmentally and financially accretive way has just been astounding.

Speaker A: The health care system, Rob, is a huge part of the economy. It accounts for approximately 20% of GDP. This includes a massive and complicated supply chain for organizations like Advent Health, which is planning for 50% emissions reduction by 2030. So how are you and your team getting buy in for this goal from the 92,000 team members engaged in achieving it across your organization?

Speaker B: Yeah, it's a great question and um, I have many parts to the answer, but let me try to peel back that onions just a little bit for you. So when we started this work, it began from um, the board having a realization that we needed a comprehensive framework for how we were going to approach these issues. So it didn't say, the board did not say we need you to do X by Y date. What they said was we need you to think uh, constructively about this issue and this opportunity and come up with a comprehensive framework to do that. And so if the board asks you to do something, then the next thing is that you need executives that are going to lead that, and you need budget to go after that approach. And, you know, thankfully, um, Marisa Faribaugh and myself were asked to lead in this. She's the chief supply chain officer. And between the two of us, we started to think about these issues. You know, when you start to think about environmental sustainability, there was really two big pillars that came into mind. One was the impacts that we're having on the planet, and we'll classify those as emissions, waste and water. And then the second part was, even if we cleaned all of those up, what are the issues of resilience that we're going to have to deal with in terms of impact to our physical infrastructure, our clinical preparedness, and legal, regulatory and compliance issues that we're going to deal with? Well, we knew from m the beginning that emissions was the most, uh, pressing issue among all of those things. We set out to measure that. When you start day one measuring emissions, and you've never done it before, and it's a very large organization, finding all of that data, finding the people that are responsible for it, collecting it, making sure the data is of high quality, and then collating it into a way that allows you to look at it. What we saw was a number that was over 3 million metric tons. It's pretty hard to say your tagline of feel whole and thinking about your communities if you know you're responsible for about 3 million metric tons of, uh, carbon dioxide. And so we said, okay, well, now that we know where we're starting the journey from, what should we do about it? It was about that time that we were encouraged to sign the, um, Health and Human Services Health Sector Climate Pledge. And to your point, that's what is, um. That's what we agreed to, but not on day one. What the pledge asks you to do is reduce your scope one and two emissions by 50% by 2030, and then bring your scope three and everything down to zero by 2050. So when we started to look at that pledge, our CEO said, look, it sounds right, but we don't have the culture of signing pledges without knowing how we're going to get it done. So why don't you go figure out where are the levers, how do you pull them, how long might it take and what might it cost us to get there? If you can convince me that you understand that, we'll go ahead and Sign that pledge. So we went and we started thinking about what are the different levers that you can pull around emissions. There's some grid greening going on, there's some energy efficiency work that we can do internally, there's some on site solar, there's community programs and then there are these large uh, off site utility scale um, renewable energy projects that we could become involved with. Once we signed that and started working on it, the first thing that we did was take the biggest rock which were these large off site utility scale projects. And we went through a big competitive process to finally sign two agreements. The first one started in 2024 and so as of January of 2024 we had about 40 plus percent of our electricity was being sourced from wind, um, as part of a virtual power purchase agreement. The second deal that we've signed with our partners, um is developing about 3,000 acres of solar that will be finished by the end of this year. And those two deals together will bring us to 100% renewable electricity across Advent Health's entire footprint. That's in excess of 1 terawatt hour of power. And those two deals together have over $100 million positive expected net present value. So when you're starting a really monumental task of trying to transform a large operating organization and you can in about a year and a half or two years get through the process of understanding the landscape, finding the levers, understanding how you're going to negotiate those deals and begin to put them in place and you're doing something that's both financially and environmentally accretive, the momentum really starts to pick up around that. The other part to this that you asked me about is like, how are we getting buy in? How are we getting engagement? Somebody else has asked us how do you engage your senior leadership in these conversations? And our answer has been we don't have to. It's who they are. They're not asking us to do this work and trusting that we're going to do a good job. They're getting involved in the details and understanding. They're rolling up their sleeves and getting their hands dirty. They're asking us to lead it. But they're involved in the making of uh, that project as well. And I think that curiosity that we have throughout our leadership team and the um, desire to lean in and to find creative solutions, um, has really helped us along the way in this journey.

Speaker A: You know, that's an extraordinarily rapid pace of achievement that you're accomplishing and it almost sounds uh, a little bit unreal. When you look at the overall landscape and how many companies, not only in health care, but across all sectors of the economy are struggling with getting these types of plans in place, I can't tell you how much it means to hear that senior leadership of your organization is getting involved with the day to day work as well as the long term planning. Because that's what we hear from the people who are tracking metrics and taking care of that kind. That side of the business is the key to the process over time. Can you give us a couple of examples of specific issues that, um, Advent Healthcare has launched programs to solve? You've already mentioned the large utility structure, type of energy system, but are there other things within that, within the organization that you could pinpoint for us that have been accelerated in pace?

Speaker B: Yes, I'm happy to do that. Uh, but at first I want to touch on uh, what you're saying about what I call the direction of travel. Right. So what we've seen with many of our peer organizations, and there's not one right way to do this right, we want everyone to be biased to action, but your pathway is going to be different. What we've seen in a lot of other organizations is that this work typically starts somewhere in the middle of the organization with employees that are passionate. Right. Like from what I said at the beginning, they care about these issues, they want their employer to pay attention to these issues that are important to them. And they band together and they try to move the ball uphill. And it typically gets stopped out because there's some initial financial cost to it. And in any organization, capital is always at a premium. And so it's very hard to move the ball uphill when you're not able to show that immediate, uh, financial impact. And at that level of the organization, it's hard to do things like utility scale, um, electricity programs because these are company wide. So you can't start it from a division or, you know, a unit. You've got to do that at the corporate level. For us, the real reason why this has moved quickly is because it started from the board realizing there was an opportunity for us to think differently about how we were doing our work. And from there it rolled downhill. Our CEO is fully bought in, our CFO has been fully bought in and incredibly supportive. We have a chief administrative officer who at that, um, C suite level is helping to organize and run and manage this sustainability broadly. And so when it starts from the top and you're able to roll the ball downhill, the pace of change is very different than when you're starting somewhere else and you're trying to, uh, move it uphill. So to leadership groups and boards more broadly, I'd say start at your level. Give your employees and your executives the license to operate creatively and tell them if you can find ways and if you can find things that help to solve business problems, um, and do it in an environmentally and financially accretive way and obviously keep your core mission and purpose intact. You want all of those that you can get. So, expanding on the, uh, renewable electricity, uh, piece for us, particular to healthcare, one might not think of it, but anesthetic gases are incredibly potent, um, emissions. And so when we measure the emissions coming from that, while it's not the largest piece of our emissions, it was an issue that we started to think about. How can we change that? How can we bend the curve on our emissions coming from anesthetic gases? There's two different ways that we looked at this. One is there are some gases, um, which were used more historically that are very potent. You could encourage physicians, um, to change the gas that they're using to a less potent gas. And the step down in emissions impact is considerable from that. But what we learned by examining the problem more closely was that the use of nitrous oxide was really the greatest problem. And it's not the use of nitrous oxide so much as it is the way that you deliver it. So in a hospital, typically, you store large nitrous oxide canisters in the basement, and you run pressurized pipes up to the or where you plug in a plastic tube and turn on the gas. Nitrous oxide is such an inert gas that it tends to escape the couplings in the pipes. And what we saw from our own numbers and what was verified by health systems around the world is that the loss rate from the canisters in the basement to what actually made it to patients is somewhere around 90 to 95%.

Speaker A: Wow.

Speaker B: Now, yeah. Now this is a problem that, from a financial perspective, is not that big a deal, because nitrous oxide is not very expensive. And it's also not a patient safety issue because they were getting the gas that they need at the right period of time. But when you started to think about it from an environmental lens and you say, how could we solve this problem? By putting smaller canisters on the anesthesia carts in the operating room, you essentially eliminate all of that leakage and you save a little bit of money at the same time. So now you've got a, ah, large organization, you've got people like me who are not clinicians, um, suggesting answers. Physicians aren't just going to listen to me and do what we think is right from an environmental perspective. And so you start engaging your leadership, your chief medical officers and the heads of your anesthesia groups, and you start talking about this with them. And it turns out they all knew that already. They were sort of wondering why it was taking us so long to get around to helping them solve the emissions that were coming from their part of the business. And so now with the green light on that, in 2025, we're going to be rolling forward and working towards how do we change the way that we do that. Now that we've got, we understand the problem, we've measured it, we know the levers, we've got buy in from the people that are responsible for this part of the business, and now we've got to go implement it. And that's sort of the pathway that you see again and again that allows these kinds of solutions to be brought to bear.

Speaker A: So within a reasonably short period of time, in terms of, um, infrastructure for a large organization like yours, you've gotten the buy in across the board from all departments at all levels of seniority. And it's being implemented. When you said in 2025 is the timeframe for having this particular issue solved,

Speaker B: we'll be working on it, um, steadily throughout 2025. I don't have a solid timeline on when it will, uh, be fully implemented. We've got to change out the supply chain, um, to make sure we're getting the smaller canisters. We've got to make sure they're all available on the carts. We've got to decommission the pipes. You know, there's a number of steps, but the biggest issue is understanding the issue and getting buy in to move forward. Now it's a matter of actually getting it done. But we've got all the green lights that we need for that. But it's really a very collaborative work effort. The more exciting thing now, Paul, is that all of these elements create momentum for your work. And in 2025, we're rolling this out across all of our employees. You mentioned 92,000. We're right close to actually crossing 100,000 employees. Employees. In the very beginning, I told you how important this was to them. And as we roll this forward, what we're saying to all of our hospitals and facilities is in 2025, we want you to all develop environmental sustainability plans. Uh, we will work with you to help develop Those plans and then you'll start working towards implementing them later in 25 and in 26. But even out in front of that, the number of stories that are coming towards us from inside the organization that we did not initiate on our team that show that enthusiasm. We have hydroponic farms, um, being put in place at hospitals that are providing clean uh, produce for patients and uh, employees in those places. I even had our team of uh, IT who develop and program our web pages come to us and say, hey, we want to tell you about the work that we've done. We've figured out that there are more efficient ways to program our web pages so that when they load, they use less electricity. And we can measure the number of times that it's loaded and the amount of electricity that we've saved through the back end coding work that we've done on our web pages. And it's mind blowing because you have smart people throughout the organization that care deeply about this work, that are finding their place in it and they're coming up with creative solutions that I could have never imagined. And we haven't even really turned on the tap internally. But we're doing that this year in 2025. And I think the stories that are going to come through letting this work, telling everyone that this is important to the company. We know it's important to you, we know it's important to the communities. And we're giving everyone a license to operate creatively, to find ways that we can be environmentally accretive. The passion is just filling the organization for this work right now. And it's, I'm, I'm so excited to see that happen.

Speaker A: Well, listen, I'm very excited for you and Advent Health and your entire teams because this is what it takes, right? It needs to be from the top down and the bottom up with everyone engaged in it, and especially in a large organization like this, there must be a tremendous amount of effort being put into organizational, uh, processes within the environmental sustainability team and focus for the whole company. This is very exciting, Rob. I'm really happy to have had you join us this morning. If there's a 30 second example you can give us, uh, we can close out the program that way, but if there's uh, if not, we're really glad that you were able to join us and we want to know where online our followers can find out more about sustainability goals and programs at Advent Health and how can they get in touch with you to find out more about the issues that we've discussed and all the ones that you're finding out about from your teams within the organization that we haven't.

Speaker B: This has been a joy. Paul, thank you again for having me. The work that you do to, uh, get the message out is the work that needs to be done. You know, we've talked about, you know, first gear for us was really trying to make sure that we understood the issues and come up with a game plan. Um, second gear for us was starting to get some of that work done. But we need that network effect. We need other people to be encouraged and inspired that there are ways to do this work that are, um, both, like I said, financially and environmentally accretive. I can tell you, it's a lot of fun. And so third gear for us is really getting the word out and it's working with you, um, and others that are helping to share this, uh, work that's so important to us. So I can't thank you enough for that. Um, for more information on Advent Health Sustainability Journey, we've published it all on our micro site, so it's adventhealth.com sustainability. We have both our annual sustainability report there, which shows all of our metrics and measures, and we also have one of the requirements that was part of the HHS Health Sector Climate Pledge is a climate resilience plan, which talks about not only how are we as an organization going to be prepared for climate change, but more importantly, how are we going to care for those in our community who are most affected by climate change. I regularly, uh, post and share updates on the work that we're doing on LinkedIn, so feel free to check out some of the posts that we've made on LinkedIn, uh, and I'm very happy to engage with anybody through that platform, um, as you'd like. So thanks again, Paul.

Speaker A: Great. And if you have any documents or any studies, anything that you would like us to attach to this podcast program, we'll be happy to do that as well. So thanks again to today's guest, Rob Roy of, uh, Advent Health, and followers of the Sustainable Finance Podcast can join me again next week for another episode. I'm Paul Ellis and this is the Sustainable Finance Podcast.