Policy Momentum, PE Interest Could Spur Major Growth for PACE

The Program of All-Inclusive Care for the Elderly (PACE) model performed especially well amid the COVID-19 emergency. Building off of that momentum, it’s likely that the model will continue to make inroads throughout 2022.

“What a great world we’re in for PACE expansion — I think it started with COVID,” Jade Gong, founder and principal of consulting firm Jade Gong & Associates, told Home Health Care News. “The data was coming out on the PACE model and how well it wraps around enrollees, with the home care model and the flexibility, compared to institutional providers. COVID really highlighted the success of PACE.”

Indeed, PACE’s ability to keep seniors safe made it stand out as a care delivery model.

Specifically, PACE enrollees have contracted COVID-19, or died as a result of the virus, at one-third the rate of nursing home residents, according to data from the National PACE Association (NPA).

One PACE organization, the California-based WelbeHealth, saw a COVID-19 death rate of 2.4% while serving Los Angeles and Central Valley, which have both been COVID-19 hotspots at times, according to a case study conducted by UC Berkeley.

Additionally, the U.S. Department of Health and Human Services (HHS) conducted an evaluation comparing PACE to other integrated models of care last year. The department deemed PACE a “high performer” due to the model’s ability to keep patients out of hospital and emergency rooms.

Even before COVID-19, the PACE model achieved a 24% lower hospitalization rate for dual-eligible beneficiaries than Medicaid nursing home services and a 16% lower rehospitalization rate than the national rate of 22.9% for dual-eligible beneficiaries, according to NPA data.

These positive PACE outcomes have resulted in attention from private equity (PE) firms, according to Stacy Guffanti, director of managed care at Cain Brothers.

“The big piece has been just more private investment coming into the sector,” she told HHCN. “The most notable was Welsh, Carson, Anderson & Stowe backing InnovAge (Nasdaq: INNV) a few years back. Then they sold a piece of it to Apax Partners, and InnovAge went public last year.”

Another PACE operator, ConcertoCare, is backed by Deerfield Management Company, a New York City-based health care investment firm.

“It’s very interesting,” Guffanti said. “When you think about PACE programs, the piece that is challenging is how capital intensive the programs can be.”

As health care needs continue to shift, the PACE model fits into policymakers’ and consumers’ larger embrace of non-institutional alternatives.

“There’s always been a desire by consumers and policymakers to substantially shift care into the community,” Shawn M. Bloom, president and CEO of NPA, told HHCN. “I think that’s been expedited as a result of COVID.”

Based in Alexandria, Virginia, NPA is an industry advocacy group that focuses on federal and state policies to support the financial viability of the PACE model.

In terms of PACE-related policy traction, Bloom pointed to the PACE Expanded Act of 2022. The legislation was introduced this month by Sen. Bob Casey (D-Pa.), chair of the Senate Special Committee on Aging, and Sen. Tim Scott (R-S.C.).

“It would help to remove a lot of the barriers for accessing PACE by consumers, and it would address some of the state and federal barriers to expand PACE,” Bloom said. “We are also seeing efforts at the state level. We have about six existing PACE states that are undertaking pretty significant efforts to address longtime barriers that have really stood in the way of PACE growth over the years.”

These efforts are paramount because despite PACE’s proven track record, the model is still relatively underutilized and has not seen major expansion.

Though the model is roughly 50 years old, only 140 organizations currently operate PACE programs. These programs are available in 31 states across the country and about 58,000 people are enrolled in PACE, according to NPA.

As a Medicare and Medicaid program that helps keep people in their communities, PACE offers an alternative to nursing homes. Oftentimes, programs are run out of community-based centers with the support of in-home care providers and their staff.

About 2 million Americans could qualify for PACE services. Currently, PACE organizations have a penetration rate of just 3%. Regulation and policy challenges, limited access to PACE, lack of awareness of PACE by seniors and capital-intensity to develop are all factors that contribute to a low penetration rate, according to a recent Cain Brothers report.

These and other roadblocks still loom large when it comes to scaling PACE programs across the U.S., according to Gong.

“The barriers to PACE are still there,” she said. “Long development time, the complexities of the approval process — starting with the [request for proposal] (RFP). There are still significant barriers that can be addressed, which is why it is so exciting that we have the attention of policymakers who are thinking about reducing the barriers which need to be addressed and also expanding PACE to additional populations.”

Looking ahead, Gong points to a number of states that are making progress in either establishing or expanding PACE programs.

“D.C. did an RFP and awarded its first PACE program to Edenbridge Health and its partners,” she said. “Over the past few months, we’ve seen Maryland issue an RFP for multi-site expansion. Louisiana did as well, they just awarded two organizations. Illinois also issued an RFP.”

Gong also noted that there would be upcoming PACE programs in Kentucky and Missouri, states that did not previously have programs, as well as RFPs likely coming out in Ohio and New Jersey in the coming months.

Over the next two years, there is potential for significant growth, according to Bloom.

“We’re looking at the potential for about 40 to 50 new PACE organizations in the next two years,” he said. “Over the past 10 years, we’ve averaged about five to ten a year.”

Given the close working relationship between PACE operators and home-based care providers, it’s also likely that the growth of the former could bring additional value to the latter.