AllyAlign CEO: I-SNPs Will Form ‘Permanent Pillar’ in Changing Skilled Nursing World

The exponential growth of Medicare Advantage (MA), with its lower reimbursements and greater length-of-stay pressure, has been a thorn in the side of many skilled nursing providers.

As part of a bid to wrest back control, SNFs are increasingly looking to become insurance providers, driving the growth of individualized Medicare Advantage options as they move into institutional special needs plans (I-SNPs). In fact, many SNFs see the move as their ticket out of a maze of pressures from payers and into the momentum of the MA world.

But many SNFs aren’t familiar with the administrative and logistical challenges of moving into the health insurance space. That’s where AllyAlign has found a niche. The Glen Allen, Va.-based company, which was founded in 2013, works with providers — including, but not limited to long-term care providers and SNFs — to help them launch provider-sponsored managed care plans.

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SNN recently spoke with AllyAlign president and CEO Will Saunders about the company’s work and what he sees at the intersection of insurance and long-term care.

Can you talk about the nuts and bolts of how AllyAlign enables SNFs and LTC providers to launch their own plans?

We operate I-SNPs with our partners, chronic care special needs plans for dementia, and then dual-eligible special needs plans (SNPs) as well. Each plan is meant to ensure that a chronically ill, frail, and vulnerable senior is in the right plan for their condition. And we now believe that the outcomes and empirical data support it — that the right vehicle to manage the care from a costs and quality perspective for that population is the LTC provider themselves.

We have developed a model where we perform the services, the administrative and management services that any health plan needs.

Obviously most special needs plans have relatively low enrollment, compared to the larger MA plans of the publicly traded players that are very large. So operating an SNP efficiently is very important, because you can’t have the administrative expense crowd out the expense that you need to care for the member.

That’s what we do. We typically also take a minority investment in the plan itself, so we’re not just a vendor, we’re also an equity holder — so we’re at risk with our partners, and we rely on them to deliver the care model, which they do very well because they’re well positioned to manage that. We teach them how to be successful under the risk-based model.

The construct is to grab the premium dollar directly if you’re an LTC provider, and then manage in the best interests of the patient. That also tends to be the best economic model as well.

One thing I wanted to ask about is your time at Xerox, where you were president of Xerox Business Services working with states on Medicaid administration. Can you talk about the work you did there and how it relates to your work now at AllyAlign?

Depending on the state, 40% to 55% of Medicaid spend is for nursing home-eligible recipients. It’s an under-recognized, under-publicized dynamic of Medicaid, obviously, because it’s just not at the forefront of health reform. My previous role was to really help Medicaid states be successful administering their program.

I don’t know if you know how Medicaid is administered, but it’s big business. It’s typically the biggest contract a state has, is to administer their Medicaid program. So that’s what I did. We worked with California, Texas, 35 states one way or the other.

I got to know several Medicaid directors very well, and I understood the pressure and the dynamics that the nursing home-eligible population put on Medicaid. When the Medicaid states began to plan and experiment to put the dual-eligibles, to include nursing home-eligible folks into third-party managed care, I knew there would be a disconnect. I didn’t believe the managed care companies were ready to manage nursing home residents. I didn’t believe, for the most part, that the LTC provider community was ready for managed care. So that’s why I launched my company.

My passion is reforming the health system, and my passion in reforming it is that you enable the provider to take care of the complex, frail, vulnerable senior. That’s why we developed the model we have. Our LTC system in this country is bifurcated between private pay and dual-eligibles, and I understand the dual-eligible world very well.

Once we’ve gotten into this, we understand that the clinical condition typically of a dual-eligible near the end of life is very close to the condition of a private-pay senior near the end of life. The capabilities we developed are very transferable and very applicable.

How many long-term care providers do you currently work with, in the capacity of helping them offer a provider-sponsored managed care plan?

We have 19 plans in 16 states. I couldn’t give you the number of actual providers because several of our plans have dozens of providers, so I apologize for not having that metric at the tip of my fingers. But we work with a lot, and I would tell you that the LTC community is best equipped to manage their own population. The key is to directly access the premium dollar, so that they can directly enjoy the rewards of changing their model for value-based care.

In other words, if you change your model and you pursue a value-based model, which is lower health care costs, higher quality, and also higher costs of delivery for the LTC provider, that works if you access the premium collar directly, and you control the dollar for your own member.

It does not work if someone else controls the premium dollar and is not going to share with you the vast majority of savings from your efforts, because there’s not enough margin to fund what really needs to be done for these patients just from semi-sharing, if that’s a term, the benefits with the provider from a large payer.

I am biased, I freely admit. But I believe my bias is informed by data. I believe the outcomes and data demonstrate that third-party payers are not equipped to manage the care of institutional Medicare recipients. It has to be the provider themselves. By the way, that doesn’t have to be a skilled nursing facility, that could be a physician, a senior living provider, it can be any of those constituents. But a provider that has a relationship with that member and is responsible for their entire care is the vehicle to properly manage them.

Let’s say a provider takes this leap and launches a managed care plan. Do facilities ever run into challenges keeping costs down in the beginning? Would you say there’s a learning curve, and if so, how long does it usually last?

I don’t know if I would use the term “learning curve.” I would say that it’s a model that’s the provider needs to learn. Learning what the keys to success are in Medicare Advantage is very important. Enrollment is a key to success, and our enrollment percentages are superior because we’ve learned to really engage with our provider partners to compliantly enroll members. But that’s one of the first things that leads to failure in MA in general, and special needs plans as well, the inability to enroll folks. You can’t activate your care model unless you have a concentration of members.

Then the care model itself — the foundation of it is, for the most part, the pathways and protocols and capabilities that most providers have already developed just to be competitive in their market.

But it is learning the keys to success, and the operational disciplines to success around MA as well. It typically takes six to nine months. We like for our plans’ Year 1 to be stability. That means that the plan is breaking even for the full year – which most MA plans would kill for, by the way.

Then we want Year 2 to be what we call viability, which is you’re beginning to generate returns. Then Year 3 is what we call optimization, where you’ve really learned the levers of success, your facility understands it, and you are really driving superior outcomes for your members and their families.

And you’re also enjoying the economic returns, which is important.

You mentioned importance of concentration of members. Obviously a hard number would vary, but what is a good concentration of members for an I-SNP to get off the ground?

I think there’s two intertwined dynamics here. One is that you need a core set of members just to cover the fixed costs of the plan. AllyAlign charges its fees on a variable basis, which is in the interests of my partners, but there are core expenses such as actuarial fees, legal fees, other things that are de minimis when you have a significant membership, but are overwhelming when you have — call it less than 300 members.

Then for a community or a facility to really change their behavior, our experience is you need at least 40% of eligibles to really have the provider pay attention. We like to get our enrollment over 55% of eligible members. And you can’t ask providers to practice in a fee-for-service way for one population and a value-based way for another, they need to practice the same across the community. That core membership within the community helps to drive that.

With our partners, we have some exceptions, but we really don’t want to get involved in situations where we have less than 1,000 members as we move through the end of Year 1, because it’s really not worth everybody’s time.

So that leads to a good question, which I’m sure you’re going to ask, which is how do you do that? And there are providers who are large enough to do that, but what’s also occurring, and the reason I didn’t answer your question with precision, is that we have multiple coalitions that are coming together, of providers in the same market who are organizing. I can’t tell you how effective that is.

The key to the industry is to access the premium dollars. This is a care model fueled by an insurance model, the MA plan. If you think about most large national MA plans, they are insurance models with a care model when they need to have one — follow the difference? So our providers being able to use the insurance entity as an umbrella to develop that funding stream is important, and a key to success.

From your vantage point, what are some of the qualifying criteria for a provider to look into offering a managed care plan? One common thing I’ve heard in my coverage is is that this isn’t for everyone, so what are some of the qualifications a provider needs?

I think the first thing is you’ve got to want to do it. I know that’s not a quantitative thing, but it is a lot of work, and it’s a lot of effort, and it has to be probably your key priority for a nine-to-15 month period, I would call it. It doesn’t have to be the key priority forever, but that’s important.

The second is a commitment to quality, and that takes on similar forms. A commitment to quality means that you want to take on the responsibility of managing the holistic care of your resident. You want to be responsible for advanced directives. You want to be responsible for treating them in place in the SNF or in the senior living community, if they have a condition that is appropriate to be treated in the community. It’s a commitment to expand your care team and your care model. And it’s a commitment to move away, if I may be so bold, from the therapy-driven, fee-for-service model that the industry relied on for a long time.

Those are the keys to success. This is not rocket science; it can be done. We have several partners that are remarkably successful, and like most things in life, they’re successful because of the focus and sweat equity they put into it. If it’s one of a dozen priorities or initiatives or a pilot, first of all, I don’t think we would get involved with it, because if you were to listen to me talk to my new partners, you would think I’m telling them not to do it — because I educate them on the amount of work that it’s going to take. It can’t be something that you just dabble in.

How have you seen demand for your services change over the years?

We are now managing right at 10,000 lives across our portfolio, which we’re very proud of, and that’s a lot. That is a rounding error of a rounding error for the big plans, but even for the big plans, that is a lot of special needs lives. It gives us a foundation to really invest in our infrastructure,

We have now seen that this is going to be a permanent pillar of how a SNF manages within the new world order, if you will. And I don’t think anyone would argue that we were kind of the first mover in getting providers to do this in a serious way, in terms of provider-sponsored special needs plans. We’re now investing significantly in our infrastructure and our tools, and the concentration of lives we have and our partners really enable us to do that.

I think people who know us would tell you that we’ve responsibly grown. We’ve grown quickly, but we’ve really focused on executing. What we’re doing by its nature is risky, right? We’re taking full risk, so we have to concentrate and execute. We only work with a finite subset of partners a year. We probably could work with more, but we’re about executing because we’re in this for the long haul.

What do you expect from 2019 in the world of managed care plans, and how will providers react?

The coming year I think is just continuing to execute with our current providers, and the partners who have chosen to apply with us in this cycle. But I think what you’re really asking is: How is the model going to continue to evolve? I think that once the provider-sponsored special needs plans industry really tells its story to CMS and other constituents, in terms of the outcomes for the member, I think there will be increased reliance by policymakers on the model. What form that takes, I’m not smart enough to predict. But it’s inevitable, in my opinion.

Then I think providers are going to aggregate and gravitate more to the model. The comment you made that it’s not for everybody is true at this point and time. And it doesn’t ever have to be for everybody. But I do think almost every quality provider that views themselves as a health care provider and as providing quality care for their resident — as opposed to being in traditional real estate business mode — I think those providers will gravitate toward the model over time.

Probably the biggest dynamic I think will occur is providers will increasingly work together in contiguous markets to leverage the power of the plan, to be an umbrella that they can be successful in. I think that will be something that increasingly occurs, going forward.

I think the other thing that’s going to happen is the faith-based, not-for-profit segment of the industry is going to initiate more and more plans as well. To date, it’s kind of been maybe a little bit more in the for-profit side, but I think the faith-based not-for-profits are going to catch up quickly.

Is there anything else you’d want to add?

Housing, nutrition, and other long-term supports and services are not reimbursed by Medicare fee-for-service. CMS has announced in the last two cycles that things like personal care services, nutrition, housing, that kind of thing, can be subsidized and paid for through MA plans — and every SNP is a MA plan — via what’s called a supplemental benefit.

That’s caught the attention of a lot of providers, because they perform those services, and the plan can typically cover those services they’re already providing. That tells you, first of all, that CMS is really behind innovative models in the LTC space. That tells you they’re really behind provider-friendly models, and that tells you some of the traditional barriers of what Medicare and Medicaid could and could pay for are beginning to be eliminated. Which is incredibly helpful.

You’ve touched on my government experience, and I’ll give you a pro tip: Always watch what they do, always operate within what they promulgate and announce, as opposed to trying to advocate for them to do something different. Congress permanently reauthorized special needs plans in the last budget act. Obviously, CMS was consulted on that by Congress, and that just speaks to the gravitas with which CMS and Congress and other policymakers to view the model.

So now it’s the responsibility of the industry, and AllyAlign is playing its very small role in that to help the industry meet that challenge.

This interview has been condensed and edited.

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