Steve Fogg

Welcome to our podcast called VERSED with Scott Tittle, a VIUM Capital podcast where we'll be interviewing leaders in the long-term care sector who are shaping the future of the profession. We'll be discussing issues top of mind to them so our listeners can be even more well-versed as they tackle their day. This podcast is powered by VIUM Capital, a new national financial services firm focused exclusively on providing capital solutions to the seniors, housing and healthcare sectors. For more information, you can find us at vumcapital.com. I'm your host, Scott Tittle. This is VERSED.

Scott

We'd like to welcome to this episode of our VERSED podcast, Steve Fogg, Chief Financial Officer at Marquis Companies and Consonus Healthcare. Hey Steve, welcome to our podcast.

Steve

Thank you. Thanks for having me.

Scott

Yeah, it's a real honor to have you today. Before we get started into our major topic, I'd like for our listeners to get to know more about you and your company and really your family, because it's an incredibly inspiring story. Tell us about your family's history with the sector and a little bit about your company and then your role at your various companies as well.

Steve

Well, as you introduced me, I'm the current Chief Financial Officer of our organization. We operate under three brands. Marquis Companies is our facility brand. Consonus Healthcare is our long-term care pharmacy and long-term care therapy services brand. And then we have Ageright, which is our population health or value-based care brand. So both myself and my brother Phil Junior, current board chair of American Healthcare Association, are fourth-generation operators here in the state of Oregon, our great grandmother operated the first nursing home in the state of Oregon in 1946. We have grown in the industry and now have a fifth generation working under us as well. So we've been doing it for a long time.

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Scott

That's incredibly inspiring. I want to make sure our listeners heard that, because I know we're pretty familiar with sort of second generation leadership, third in some cases, but fifth is really special, especially in the western states as well. So I just can't thank you enough for your family's commitment to the sector and your residents, but also improved quality in all directions. So I think that's an incredible story. It's also about maybe Marquis in particular and then I'd like to get into the discussion about value-based care.

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Steve

We today operate 27 facilities, 21 are nursing homes, six are assisted living and or memory care. Most of our facilities are in the state of Oregon, but we also have one facility in Northern California in Redding and two large facilities in North Las Vegas. And we have about 1,500 residents and about 2,500 employees in that particular business line.

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Scott

Not only the Pacific Northwest, but stretching into some western states as well. Now this podcast series that we've got going this year, it's focused on this new emerging, maybe in some cases not so new, but accelerated emerging discussion on value-based care. Value-Based care can mean something a little bit different to each person as you talk about it and how broad it can be defined. I've heard you talk about these creative reimbursement funding opportunities. What does value-based care mean to you?

Steve

When you first start thinking about value-based care. You know, the definition's pretty simple. The definition is payment for services that's tied to quality and or outcomes versus what most of us looking back have grown up in this country where we received payment just based on providing the service itself. And so while that definition seems simple, there are so many variations of what a value-based care arrangement might look like. I mean. On one extreme I would say that a value-based care arrangement could be a half a percent to one percent of the total fee for service payment. That might be tied to some quality benchmark. In our industry the common one would be a hospital readmission rate. And then you could go all the way to the other extreme, which I know we'll talk about a little bit today. But for those of us that are provider operators of facilities that also have entered the Medicare advantage space and have our own institutional special needs plan or ISNIP, we're actually taking risk on the entire healthcare dollars. So at the highest level we would say that the entire 100% of what gets paid is at risk. Now that we're actually in the space of having our own insurance plan. And then there are myriads of other methods in between.

Scott

And we're gonna get to some of those other opportunities as we talked to the guests throughout the year. I'd love to focus on your role specifically with your ISNIP because you're one of the first companies in the United States to create a provider owned ISNIP or Institutional Special Needs Insurance Plan. So tell our listeners what an ISNIP is exactly, as you have in your model.

Steve

An Institutional Special Needs Insurance Plan is really a niche Medicare advantage plan. So at the highest level it's no different than a Blue Cross Blue Shield Medicare Advantage plan or a United Healthcare Medicare Advantage plan. We all function under the same regulatory environments in terms of how we manage, but there are really two distinct differences between an ISNIP and a traditional Medicare Advantage plan. The first one being that all of our members have to meet a definition of needing 90 days or greater of skilled nursing care. Whereas in a traditional MA plan, the only real requirement is that you have to be over the age of 65. And so that's one distinction. The other main distinction is all of our members are housed in long-term care facilities, whereas traditional Medicare advantage plans will market their plan to anyone that's over 65 within the counties that they get approved. So two very specific things that make the plans very different and yet we all function under the same regulatory environment.

Scott

Really interesting. So say a little about your thought process back then when you created Ageright? Because there are a lot of operators right now that contract with an outside entity to come in and provide the services, you all decide to bring a house and take the 100% risk on yourself. What was that thought process like?

Steve

Would've been late 2014, early 2015. We actually went live with our plan on January 1st, 2017. But back then, which is now almost 10 years ago, there were really two drivers that got us motivated or interested in this concept. By far the biggest was recognizing that we needed to improve and upgrade the quality of physician and or nurse practitioner services in our facilities. It was rare that we saw a physician or an MP in our facilities providing services to our residents. We had the traditional medical director relationship and every now and then a physician might come in. But we wanted to upgrade that for a number of reasons. One, to be able to improve the experience for the residents that we cared for, which also hopefully would translate to an improvement in market share as well. 00 also we saw the ongoing movement and growth in value-based payment arrangements that we believe these physicians and NPs in our buildings could have a very positive impact on the hospital readmission rate. So the desire to upgrade that came with challenges at the time because the economic model for just providing physician services is a tough one in a long-term care facility in terms of how physicians get paid. We saw the ISNIP as a way to provide some economics and some dollars from that insurance plan to help cover the cost of these clinicians, these physicians at NPs. And so that was one driver. The other driver that got us motivated was that we had a belief that by having physician and NP presence in our buildings and improving experience, it potentially could have an impact on our long-term senior living occupancy. So those residents that are going to be in the facility until they pass we thought that it would have a positive impact. And we have been in an environment probably more aggressively out here in Oregon than other parts of the country. But similar, we've been seeing declining occupancy with our long term living base. And so we saw it as an opportunity to potentially improve that and have it go the other way.

Scott

When you talk about the work you've done there with Ageright you created an insurance company, right? I mean that's the big step to be taken there, which is you had to go to the State Department of Insurance and say a little about those challenges and those major investments on that side.

Steve

Starting your own ISNIP or Medicare Advantage plan. And again, it's no different than the big plans. It is a big task. So for anyone out there in the industry who's considering it, while I highly recommend it, be mindful of the fact that it's a big lift on the front side. So you are needing to submit applications and get approved with the individual state's department of insurance. With that comes varying levels of initial capital requirements to be able to fund the insurance company, but also to just work through all the regulations on that front. In addition to that, you have to submit an application to CMS at the federal level, get approved for that, which probably the biggest lift there is you need to build out an entire provider network as part of submitting that application. And so it is a big lift in the long run. It's well worth it, but to be mindful it's no small task for sure.

Scott

I'm just curious because I have a background in insurance law and I used to do some work here in the state of Indiana. Did you have to file to create an insurance company in every state which you operate? Or is there some cross-state line reciprocal agreement?

Steve

No. Every state has its own minimum capital requirements. Sometimes the minimum capital can be reciprocal. I would tell you that we only function our ISNIP in Oregon, so we haven't formally gone into any of the other states. Unfortunately for us, Oregon has, if not the highest, one of the highest minimum capital requirements, which is two and a half million dollars. So for a plan our size, that was an unfortunate added challenge for us versus other states that might be two 250 or 500,000 as the model.

Scott

Well, we're gonna talk to some other folks later this year. There may be smaller operators that still find ways to get into this world, either some collaborative work or in other states. And so for the listeners out there that are thinking about the heavy lift on the front end. There are some other options out there, but I think as you're hearing today, the benefits for Marquis in particular, how far outweighed the front end investment, what kind of data do you track with your ISNIP? What are your goals and what kind of data do you track?

Steve

Probably the most important metric that we track would be hospital episodes. So of the number of members that we have in the plan, how many hospital episodes are we incurring? The benchmark that we strive for is to be at 400 episodes per year for a thousand members. Our plan is actually experienced less than that. So we've done a really good job of exceeding our metric also in terms of the economic viability of an ISNIP for a provider owned ISNIP that has low membership. It is without a doubt the most important metric you get up in the thousand to 1500 episodes per thousand members. The economics just don't work. The other would be making sure that we are managing risk scores for each of the individual members since that risk score for a member drives the actual premium that we receive from CMS, it's important that we make sure that we get the right score in place. If not, our actual revenues coming in will be deficient and make it harder to be viable. So there are others managing prescriptions, managing membership penetration. What percentage of residents in buildings that we have to plan in are actually members and are we exceeding our metrics, things of that nature.

Scott

Well I know how data driven you and your brother are and so I knew you'd be right on top of all those metrics. What are you looking ahead to in the second half this year into 2024? What are your goals and objectives for ISNIP?

Steve

It's really not much of a deviation from, at least after the first couple three years of the plan. We were very focused on our own Marquis facilities in the first couple of years since we have actually created relationships with peers in our space here, competitors in some instances where we're actually marketing the plan in their facilities. And so our goals are to continue to grow with intention, grow with providers that we think our plan and their operating style is a nice fit and together we can get the outcomes to improve the experience for the residents and, and things that we need to be successful. And so continued intentional growth with operators in the markets that we're in, continues to be able to affect our operating metrics that we want to hit to achieve our results.

Scott

For those competitors in your market that would allow your ISNIP to come into work, what's their upside, what's their benefit there to allow you to come in and work with their residents?

Steve

So number one, they'll get the benefit of the physician and nurse practitioner services that we would bring into their facilities that they may not have in their facilities right now. Important to remember that the members in our plan and our facilities are long-term livers because they have to meet that 90 day test. So all of the short stay episode admissions, the ones that are traditionally covered by Medicare or traditional MA, they're not members in our plan. But one of the other benefits that can happen with docs and NPs coming into their building is that a group of people can also see their short stay residents if they want and help some of the value-based metrics and experience for those as well. So that's certainly a benefit. Another benefit is that there can be a quality incentive arrangement between the health plan and the facility and that if the facility reaches those quality requirements to be able to receive a quality incentive payment. There can be some economics back to that plan as well.

Scott

Well for our listeners who again are thinking about ways to work more collaboratively with those in their own marketplace, this may be a nice way to do that. Now you've also launched some other versions of ISNIP, an IESNIP and a CSNIP which are in a really early stage. But maybe for our listeners, say a little bit about what these other ISNIP, CSNIP, DSNIP plans, what are their individual characteristics like?

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Steve

Think of an ISNIP as providing a product to residents that live in skilled nursing facilities. A lot of dual eligibles Medicare, Medicaid covered seniors, whether in skilled nursing or assisted living. That tends to be the primary market for ISNIPs and IESNIP as simply put as I can, is a plan that allows a lot more flexibility in terms of our ability to market to a private pay assisted living or memory care type resident. It's a plan that provides more flexibility in the types of supplemental benefits that we might be able to offer to that population that possibly an ISNIP population may not have as much need for. It's a plan that maybe provides more flexibility in the premium we can charge. And so it's a way for us to attract some residents that maybe we're not attracting in our ISNIP. The CSNIP is completely different, but we're doing that for trying to attract into the independent retirement housing world or CRCs and a CSNIP different than an IESNIP where you just need to meet a test of 90 days of care or more. A CSNIP is focused on specific conditions, specific chronic conditions that a senior or a resident has. If they have one of the conditions that the C S NP is approved for, they become eligible to be on the plan. And so different than an ISNIP or an IESNIP where we couldn't market those plans. Independent retirement community a CSNIP, we can at least for those residents that have one of the chronic conditions were approved for. So we're excited about the CSNIP because again, it helps us to launch into a long-term care facility environment, independent retirement that we've not been able to today.

Scott

And then a DCSNIP might focus on a specific disease state, is that correct?

Steve

Well that's a good thought. The DCSNIP is more around dual eligibles. You have to be dual eligible for both Medicare and Medicaid to be in a DCSNIP. And it's also a function of where states that have their Medicaid bucket managed by managed care versus direct to the facilities. A DCSNIP has the ability to control both buckets, the Medicaid bucket as well as the Medicare bucket when they go out and market their services to potential members.

Scott

Well thanks for walking us down that path, those other options out there. Because we're gonna talk throughout the year with some other provider groups inside the continuum. Because I think when people think about population health management, they think just Medicare, Medicaid and big public government payer sources. But their opportunities for independent living, assisted living, CRCs senior housing also participate in different ways through population health management. So thanks for walk us through that. In addition to your role there, your companies, you also play a relating role at the national level where you're chair of the HCAN council fund connection to the Rock Management Council. I want to hear a little bit about the genesis of that council and the goals of it. But I sense is that probably an effort to try and coordinate some work among all of the provider owned ISNIPS throughout the country to try and do some advocacy and some data sharing?

Steve

The council was created a few years ago. Certainly one of the prongs, the important pieces for the need for the council was the initiation and excitement and growth in provider owned special needs plans like ISNIPS and such. So that certainly is one or any special needs plan growth by operators, whether DSNIP, CSNIP,, whatever. In addition to that, the council is also charged with making sure that we're staying in tune with traditional Medicare advantage issues that might come up related to how we work with some of the big players as providers. And then the other would be any value-based payment arrangements that CMS Medicare directly might have in place, whether it's the Medicare Shared Savings Program, ACOs, all those other programs that they've created. The council is committed to standing on top of those. I will say to date, the large majority of our time has been spent on the provider owned special needs plan space.

Scott

How many provider owned ISNIPs are there throughout the country?

Steve

Always changing, but I believe the number is in the 50 to 60 range. And when we started in 2017, I believe we were maybe the fifth or sixth to go live. Us being Ageright that time. It's my opinion that if not for the pandemic, there would be over a hundred right now. But the pandemic for probably some obvious reasons, unfortunately, slowed down the interest of operators because they were focused on other things.

Scott

Where do you think all this is going? Looking ahead 15 or 20 years, what does it look like in the future? Or maybe even provider own ISNIPs in particular.

Steve

When we have this discussion, it's really important to remember that Medicare and Medicare advantage to date has been insurance that has paid for acute services for seniors. Seniors that have acute issues need to go to the hospital or need to go to a nursing home for a period of time, insurance pays for prescriptions, things like that. It doesn't pay for housing, it doesn't pay for environments where a senior needs to go to a facility to cover the room and board. When we talk about what it looks like in the future it's important to understand those differences. I would say that you are going to continue to see growth in bringing that room and board bucket on the Medicaid side with the services side of Medicare to where the same party has control of both buckets. Anything that we do in value-based payment arrangements, the ability to drive the greatest success is if the actual operator, the provider is also responsible and in control of the actual insurance dollar. Anytime you get multiple parties in a value-based arrangement or the more parties that you get, in my opinion, the less potential or success that you have because you have differing objectives and goals. And so I firmly believe that you're gonna see a lot more Medicare, medicaid combining the bucket. You're gonna see Medicare Advantage plans that control millions of lives of over 65, I believe you're gonna continue to see them try to make arrangements with third party companies that do a much better job of managing the health of the populations that we care for in our buildings today or are about to care for. I believe that that's gonna have a dramatic change on how long-term care facility operators have sought to get market share because those third parties are gonna be much better at aligning with the providers that do the best job.

Scott

Well thanks for sharing those thoughts Steve. I think for our listeners they can probably see why I wanted to have you on today. Not only for the work you've done there Marquis through your ISNIP provider on program, but also your national leadership with the Population Health Management Council and your thoughts about the future. So this has been a really fascinating conversation today. Hey, before I let you go, I've got two questions. I always like to make sure we kind of delve into the side of our guests that are outside their normal work scope and things they're passionate about. In addition to being a multi-generational long-term care provider family, you also come from a deep racing family. Talk a little about your history with your family and the racing world and maybe a fun racing story you experienced recently.

Steve

Both my brother Phil and my dad, who's Phil Sr., Have a very courageous makeup. I'm the conservative accountant, that's why I'm the CFO. But my brother and I grew up as kids with a father who did a lot of scary types of things fast boats. My dad has raced airplanes for 40 years and both he and my brother Phil started racing cars in the mid 1990s. It was just a natural fit due to a friend of mine that actually saw my dad or saw my brother race. He convinced me to do a racing school with him even though I had no intention of getting into it. So we did that and I had my first car race in 2007. I've been racing for the last 16 years. I don't know if I have any great stories. I would just say that one of the best things about being able to race cars, being fortunate enough to race cars is you get to go to a lot of amazing racetracks. And we do have some amazing racetracks in this country with my favorite being the new Formula 1 track in Austin, which is COTA that I've raced three times. So it's a really fun hobby. I feel blessed at 57 to still be able to get out there and be competitive.

Scott

And you had a race recently cause we talked about it a little bit. In my hometown of Indianapolis, Indiana, the racing history and legends that have been in the oval track here at the 500. I actually went to the first F1 race here in Indianapolis, 500 track many years ago when the race lasted all about 17 laps because the tires kept blowing. So I think that's when Austin pushed ahead and built that track. So I gotta get up there and see it. One more quick question. I learned also when we met up last year that you have a really fun connection to the rock band Kiss. Maybe tell a little bit about that.

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Steve

Total irony. But a good friend of mine that lives in the same community that I live here in Portland and his brother happens to be Tommy Thayer, who's the current lead guitarist of Kiss. And through that relationship we've been able to enjoy concerts and get to know the entire band. The two times that we've been involved and gone to concerts, Motley Crue has also been on the list and so we've been able to meet all of them as well. I'm sure this picture will make sense, but when 8 to 10 of us at the time I would say yuppy types show up to a Kiss Motley Crue concert it's pretty obvious to see that we don't fit in. But it's fun to meet them. They're all great. What you see is not what you get. They're great guys and it was a good experience.

Scott

Thanks for sharing that. Again, I always wanna make sure our listeners get to know the human side of our guests as well. And so you've got some great stories and I always say that the Fogg Brothers are two of the most interesting people in the country. And so I think our listeners are getting a little flavor for that. Steve, I can't thank you enough for your time today. I really can't thank you enough for all you do for your residents and your staff and of course your work at the national level to make sure that we're improving quality in all directions for our current and future residents and staff. So thanks for all you're doing. It's been a pleasure to have you on today.

Steve

Thanks, Scott. I appreciate those nice words and Phil and I will keep fighting the fight for our industry for as long as we're able to. So thanks.

Scott

And for our listeners really appreciate you tuning in today. Be sure to check back in when we have future leaders in our industry that are doing very interesting work in these very interesting times. This is VERSED.

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