InnovAge CEO Maureen Hewitt: PACE Tailwinds Stronger Than Ever

InnovAge (Nasdaq: INNV) went public earlier this year with a $350 million IPO. It has since set its sights on expansion.

The largest Program of All-Inclusive Care for the Elderly (PACE) organization in the country, InnovAge is bullish on its ability to do just that, thanks to both internal confidence and also external, regulatory tailwinds.

“We continue to see positive federal and state legislative activity at levels we have not seen in recent memory,” InnovAge CEO Maureen Hewitt said on the company’s Q4 earnings call Tuesday. “This is a very encouraging sign for PACE, as interest in the program is at an all-time high.”

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Based in Denver, InnovAge has about 1,800 employees, 1,200 of which are of the clinical variety. It serves seniors in Colorado, New Mexico, California, Pennsylvania and Virginia, and has now ventured into both Kentucky and Florida.

PACE helps keep dual-eligible seniors in their homes and communities as they age. Generally speaking, PACE programs are run out of centers in communities with the support of other providers, such as home-based care agencies.

There are currently 140 PACE programs serving 55,000 participants throughout 30 states, according to the National PACE Association.

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While reimbursement rates for PACE were either stagnated or lowered during the height of the COVID-19 crisis, they are now trending in the opposite direction.

InnovAge received rate increases of approximately 5% across Colorado, Pennsylvania and Virginia, which went into effect on July 1. Elsewhere, New Mexico is still finalizing rates, and negotiations with California won’t come to a head until Jan. 1, but the organization is optimistic those will be favorable as well.

“I will highlight that we have received a mid-single digit rate increase from the state of Colorado specifically,” Hewitt said. “That is significant, given the recent rate decrease we received last year due to the COVID pandemic.”

InnovAge’s Q4 revenues totaled $171.6 million, a 12.5% increase year over year from $152.5 million in 2020. It also ended the quarter with 6,850 participants, a 7.4% increase year over year.

Hewitt also noted that InnovAge has been vying for friendly legislation for both PACE and home- and community-based services (HCBS), specifically from the federal government.

“InnovAge has been actively advocating for HCBS funding levels to stay at the $400 billion level set forth in the resolution and for policy provisions, such as those set forth in the PACE Plus Act, to be included in the final budget,” Hewitt said.

Broadly, if passed, the PACE Plus Act would provide federal grants to create new — and expand current — PACE programs. The legislation would also encourage states without PACE programs to change course through incentives.

“We do not expect any new programs to be presented until the fall at the earliest,” Hewitt said. “But we are closely watching the plan New York has proposed with interest, as they are planning a pilot program that would expand PACE to Medicare-only beneficiaries in the state for a fee.”

Growth plans

InnovAge is planning in the short-term to open up one shop in Louisville, Kentucky, and two in Florida — Tampa and Orlando. Two additional centers are also in the works, and the company expects those to be operational within the next two years.

Meanwhile, the company is constantly evaluating acquisition and JV opportunities, Hewitt said.

“Regarding acquisitions, we continue to pursue acquisition opportunities in new markets with experienced community partners who have established footprints and where the economics makes sense,” Hewitt said. “We are also continuing to look for joint venture opportunities that provide strong strategic value.”

There are two clear growth mitigators, however: COVID-19, which could effectively shut down parts of InnovAge’s business, and staffing woes.

“It is no surprise that managing turnover and retention is challenging for all health care organizations, due to the limited supply of workers and the competitive environment in which we operate,” Hewitt said.

And despite a strong vaccination rate among employees and participants, Hewitt acknowledged that the risk of COVID-19 disrupting operations remains relatively high.

“We continue to carefully monitor COVID trends in each of our markets and centers,” Hewitt said. “Should we experience COVID pressures at our centers that would cause us to shut them down partially or fully, we have the ability to do that. We also have the ability to reopen them in a phased approach as pressures are relieved.”

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