Transcript Generated by AI 00:00 Hey, 00:00 Mark Parkinson back with Park Place, 00:02 and we're in studio today with Mark Zimmet, 00:05 and I'm here in Manalapan, 00:08 Manalapan. 00:08 I, 00:09 I, 00:09 I still can't pronounce it, 00:10 but I'm somewhere in New Jersey with Mark in our studio, 00:12 which is fun. 00:14 And we're actually 00:15 continuing our series about Illinois, 00:17 where we're evaluating 00:19 What it's like to operate a facility in Illinois, 00:22 and we're here to talk about what the financial opportunities are in the state. 00:25 So Mark, 00:26 great to be with you here in our studio. 00:28 Now, 00:28 a man named Al had a pen. 00:30 That's how I was taught to spell it in high school. 00:33 A man named Al had a pen. 00:34 That will, 00:34 that will help me. 00:35 OK, 00:36 it helped me too. 00:36 I still remember it. 00:37 It's great to be here. 00:38 Thank you. 00:39 Great. 00:39 Well, 00:40 we've been talking in this series about 00:42 how historically Illinois had a terrible reputation. 00:45 And we've learned in some respects, 00:47 maybe that's deserved, 00:48 in other respects it's not. 00:50 Today we're going to talk about financial, 00:52 where 00:52 I don't want to be a spoiler alert, 00:53 but it sounds like maybe the reputations are a little deserved. 00:56 We'll get to that in just a second. 00:58 Before we get to the rating of Illinois, 01:00 I think it's great. 01:01 You've come up with an objective way to 01:03 evaluate the financial opportunities in every state. 01:07 Uh, 01:07 what are the criteria that you've used that go into your ranking system? 01:11 OK, 01:12 so we take, 01:13 uh, 01:13 we start with a retroactive look. 01:15 We see what percentage of, 01:17 of facilities, 01:18 uh, 01:18 were able to 01:19 survive 01:20 to have a positive margin 01:22 on patient service revenue 01:24 just by servicing patients, 01:26 uh, 01:26 servicing residents, 01:27 no uh, 01:28 no interest income, 01:29 uh, 01:29 and then we look to see what the factors were that drove. 01:33 That positive margin 01:35 and it comes down to 3. 01:36 It comes down to occupancy, 01:37 comes down to Medicare share, 01:39 and it comes down to labor pressure, 01:41 how much of the direct care labor, 01:43 uh, 01:43 is, 01:44 uh, 01:44 taken from the rate. 01:45 So you go into every state, 01:47 you look at the facilities, 01:48 and you're just looking at 01:50 free standing facilities, 01:51 not these hospital-based facilities, 01:53 and you're looking to see how many of them are actually making money. 01:56 And as you just indicated, 01:57 the drivers are like occupancy percentage of Medicare and the labor cost. 02:02 And then once you do that evaluation, 02:04 you have a grading system. 02:05 Tell, 02:05 tell us about the grading system that you've developed, 02:07 right? 02:07 And, 02:08 and to, 02:08 to be clear, 02:09 um, 02:10 we add back related party margins. 02:12 Uh, 02:12 it's a, 02:13 it is a really open and transparent, 02:15 uh, 02:15 look at, 02:15 at the finances. 02:17 So, 02:17 um, 02:18 you know, 02:18 the, 02:18 the rating systems and it's 02:20 A, 02:20 B, 02:20 C, 02:20 or D 02:21 is the way we look at it. 02:23 So it's split uh, 02:24 statistically, 02:25 but, 02:26 uh, 02:26 an A facility 02:27 is a favorable facility. 02:29 It's got the, 02:30 uh, 02:31 it's got the, 02:32 uh, 02:33 the structure 02:34 to support 02:35 most facilities, 02:36 uh, 02:36 can do well, 02:37 um, 02:38 all the way down to a D 02:40 where very difficult to 02:41 have a positive margin. 02:42 So if you're in a state, 02:44 people can survive and make money. 02:46 If you're a D state, 02:47 it's gonna be very, 02:48 very hard. 02:49 That's a 02:50 good way to look at it. 02:51 OK. 02:51 And so based on your analysis of Illinois, 02:53 what, 02:53 what grade did you give Illinois? 02:54 I gave Illinois a C. 02:56 Let's see. 02:57 Let's see. 02:58 It's unbalanced, 03:00 Illinois. 03:01 It's, 03:02 and we see this in a lot of states, 03:03 and this will be a theme throughout, 03:05 that 03:06 states that are dominated by one major metropolitan area. 03:10 Uh, 03:10 typically draw disproportionate resources to them. 03:14 And 03:15 promised myself I wouldn't get technical, 03:16 so I won't, 03:17 but that's what makes Illinois a tricky state. 03:20 And in addition to having this A, 03:21 B, 03:21 C, 03:22 D grade, 03:22 you've also got a subgrade of, 03:24 of 123 or 4. 03:25 Can you explain what that subgrade is? 03:27 Yeah, 03:27 that's what we call dispersion. 03:29 Uh, 03:30 the, 03:30 the, 03:30 the primary variables that, 03:32 that 03:32 are there to support a facility 03:34 that, 03:34 that determine 03:36 if a facility has a, 03:37 uh, 03:37 a likelihood of, 03:38 of, 03:39 of, 03:39 uh, 03:39 profitability, 03:40 um. 03:41 It's how dispersed they are, 03:42 it's how common it is throughout, 03:44 uh, 03:44 throughout the state. 03:45 So a num a one 03:46 means it's a very stable state. 03:48 So, 03:48 in a one facility, 03:49 most facilities are making money 03:51 for the same reason. 03:52 Um, 03:53 in a 4 state, 03:55 most facilities are making money, 03:56 but for different reasons, 03:58 Medicare, 03:58 occupancy, 03:59 whatever it is. 04:00 Uh, 04:01 Illinois 04:02 is a C4 state. 04:04 And those get really, 04:06 really tricky 04:07 to correct. 04:08 So you got a lot of people losing money for a lot of different reasons. 04:11 You've got more than half, 04:12 about, 04:13 about 50% losing money, 04:14 um, 04:14 and a little bit more than 50% losing money now, 04:17 uh, 04:17 and then for different reasons though. 04:19 Yeah. 04:20 So historically, 04:20 when you looked at Illinois, 04:21 what's been the pattern? 04:23 Illinois had a few really tough years. 04:25 Uh, 04:25 you go back to 2019, 04:27 they were in the, 04:28 let's say B range. 04:30 I'll, 04:30 I'll use it, 04:30 uh, 04:31 without giving numbers. 04:32 Uh, 04:32 they went down to the D range, 04:34 uh, 04:35 in the 20s, 04:36 in terms of profitability, 04:37 in 1922 and 10923. 04:40 Uh, 04:40 124, 04:42 they got up to B territory. 04:44 So, 04:45 uh, 04:45 there were dollars put into the system. 04:46 It was changed. 04:48 Uh, 04:48 now we are sliding back down to sea 04:51 level. 04:52 Well, 04:52 that's unfortunate, 04:53 but it's fixable, 04:54 and I know we've got a strong association in Illinois, 04:56 and so hopefully in 2026, 04:58 2027, 04:59 2028 they can fix it. 05:00 Well, 05:01 Mark, 05:01 I think it's brilliant that you've come up with 05:02 an objective way to look at the states, 05:04 and thank you for sharing. 05:05 The Illinois information with us. 05:08 And I would just again thank all of you for supporting us, 05:10 watching this video. 05:11 It's been fun to do the deep dive on Illinois. 05:14 It's probably not the worst state in the country 05:16 to operate a nursing home in, 05:18 but there's a lot of work that needs to be done there. 05:20 Although I think the future is pretty good. 05:22 Thanks again for watching the video and thank you for your support of Park Place.
