The Case for PACE: Providing a Nursing Home Level of Care at Home

  • Regulations
  • 2/2/2022
Doctor having a meeting with a nurse.

Key insights

  • The PACE program is designed for Medicare and/or Medicaid users who are eligible for nursing-home-level care but can still live safely at home.
  • Intensive-care management is essential to vulnerable patients, but a holistic look at other issues can lead to more successful outcomes.
  • PACE operates on a capitated payment system, receiving per member per month (PMPM) rates from Medicare and Medicaid.
  • Improved technology, cost management, and care delivery and payment models — as well as an increasing desire for caregiving at home — will likely drive the future of programs like PACE.

How can the PACE program help add value to your health care organization?

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What is PACE and why does it work?

When enacted decades ago, a little-known program called PACE — Program of All-Inclusive Care for the Elderly — may have been a bit ahead of its time. Now, a fresh look at PACE might help address current health care issues such as the impact of COVID-19, a growing chronically ill and frail demographic, a continued move toward value-based payments, and an increasing desire for caregiving at home.

PACE eligibility

  • 55 years or older
  • Certified by their state to need nursing-home-level care
  • Be able to live safely at home with PACE services (at the time of enrollment)
  • Live in a PACE service area

The PACE program is designed for Medicare and/or Medicaid beneficiaries who are eligible for nursing home level of care but can — with support — still live safely at home or in their community. Eligibility is not impacted if an individual needs to move into a nursing home once enrolled.

According to the National PACE Association (NPA), roughly 95% of PACE enrollees reside in their homes — the other 5% reside in a nursing home. Some 90% of enrollees are dually eligible, meaning they qualify for both Medicare and Medicaid. The remainder of PACE participants are Medicaid-eligible only or pay a premium.

PACE origins

The program was developed by On Lok Senior Health Services (San Francisco) via demonstration projects and grant funding. Congress then authorized waivers in 1987 for ten replication sites and provided On Lok a grant to provide those sites with technical assistance. The PACE program was made permanent under the Balanced Budget Act of 1997.

Dually eligible individuals are often some of the most complex patients with multiple chronic conditions. NPA’s statistics show the average PACE enrollee age was 77, the majority female (69%), who had 5.8 chronic conditions, including almost 50% with dementia. Other frequently seen conditions were vascular disease, major depressive, bipolar and paranoid disorders, diabetes with chronic complication, congestive heart failure, and chronic obstructive pulmonary disease.

Despite this, overall PACE outcomes have been positive. According to NPA, the average cost for a PACE program is 13% less than state Medicaid programs compared to a similar population. Additionally, PACE participants had fewer hospitalizations, re-admissions, and emergency room visits. Family and caregivers highly recommended PACE (97.5%) and a majority felt it reduced their burden (58%). Enrollees themselves gave the program 4.1 on a 5.0 scale.

Individualized care plans (health care/social determinants)

When we think about what impacts health outcomes, only 20% comes from clinical care. The remainder is attributable to non-clinical items, such as health behaviors like tobacco use and diet (30%), social and economic factors such as income (40%), and physical environment, like air and water quality (10%). (See County Health Rankings)

High-touch, intensive-care management is fundamental to vulnerable patients like those in PACE, but a holistic look at other issues, including social determinants, can lead to more successful outcomes.

The PACE model provides individually designed care through personalized care plans developed by an interdisciplinary team that works with the individual and family caregivers. Care plans address preventive and ongoing health and clinical care while also working to address other social determinants that negatively impact participants, such as food, social isolation, and transportation.

Examples of Services Provided in PACE Programs
Adult day care Nutritional counseling
Dentistry Occupational therapy
Emergency services Physical therapy
Home care Prescription drugs
Hospital care Primary care (physician/nursing services)
Laboratory, x-ray services Recreational therapy
Meals Social services
Medical specialty services Social work counseling
Nursing home care Transportation

The services PACE programs can provide are wide and varied. As a focal point for the program, many intensive health care services are provided at PACE day centers. These include primary care, labs, and physical therapy, but also social work counseling, recreational activities, and family services.

PACE financing: full risk

PACE can offer significant benefits to participants and meaningful relationships with PACE providers. However, support of the program may have been slowed because PACE operates on a capitated payment system, receiving per member per month (PMPM) rates from Medicare and Medicaid (and any private pay sources). Bearing full risk is a weighty decision to make, especially for those who are unfamiliar with Medicare Advantage (PMPM capitation) or other value/risk-based models. That said, it can be and is being done successfully.

PACE capitation rates are based on Medicare Parts A, B, and D as well as Medicaid capitation rates.

For Medicare, the capitation rates are generally determined as follows:

  • Parts A and B (hospital etc., medical)

    The PMPM under Medicare A and B is similar to Medicare Advantage. It looks at county-level rates which are then risk adjusted using several mechanisms. The first adjustment is CMS-HCC (hierarchical condition categories) scores by individual. The second is the Health Outcomes Survey-Modified (HOS-M) assessment taken by each individual enrollee. The HOS-M results in an organizational-specific frailty score. Together, the two scores equal the total risk score. That score is then multiplied by the base rate to determine the monthly PMPM rate.

  • Part D (prescription drugs)

    These payments include a separate risk-adjusted score. It is developed based on actuarily certified bids submitted to CMS, then interim payments are made to PACE programs. Ongoing reporting by PACE is required, with a final settlement the following year.

Medicaid PMPM payments will vary because each state determines its own Medicaid program requirements. States must follow certain parameters for rate-setting, and CMS reviews each state’s approach, but generally the approaches use a percentage of a state’s upper payment limit or cost reports, or the amount of services used and/or age and demographic information.

Medicare Parts A/B/D capitation rates are combined with Medicaid capitation rates (and any other private pay, if applicable) to create the combined pool of funding for a respective PACE program.

PACE: pros, cons, and COVID

Like other capitated payment programs (Medicare Advantage, value-based payments), preventive and ongoing care management is fundamental to keeping costs within an expected range. Health care providers and consumers also use care management to help achieve better health outcomes and address rising health care costs.

Being fully at risk means a PACE program may retain whatever dollars it doesn’t expend and use them in the future. It also means all funds may be used up while expenses are still coming in (this is where sufficient reserves and reinsurance policies can come into play). Understanding risk models and the related care management, networks, and necessary relationships can help provide a wider continuum of care and support.

While the PACE program has been around for decades, it is still small — with only 55,000 enrollees in 140 sponsoring organizations in 30 states. However, those programs are outperforming others in terms of overall costs and health outcomes.

See CLA’s 2021 Senior Living Trends Report for trends we are seeing:

  • Nursing in life plan communities
  • Aging in place
  • Workforce pressures
  • Senior living options
  • Demographics
  • Technology
  • Affiliations

When COVID hit, PACE programs needed to quickly adapt. Adaptions included modifying the role of the PACE day center, quickly developing new virtual care programs, and creating innovative ways to provide home-based care and support. Many of these innovations are already deployed by other value-based models, making PACE another testing ground for models that work

Looking forward …

Many areas of the country have sufficient populations who could benefit from a PACE program, but eligibility is limited to where approved programs already exist, and this depends on state approval. If we look into the future of long-term and post-acute care, we could think about pairing PACE with other approaches or living arrangements like Green House residences, Eden or life plan communities. And what if PACE could be reinvented for other types of populations (more non-dual eligible) so larger groups of individuals can access similar supports and services?

Many factors we currently see could help propel PACE forward, such as:

  • An aging population who will need health care, long-term care, and support
  • More and more families caring for this aging population; they also need some type of assistance
  • Technology facilitating care delivery; telehealth, digital health, and remote patient monitoring were used during the pandemic and fit seamlessly into a model of care where individuals still reside at home or in their community, and who need ongoing chronic care management
  • Emerging role for home health care
  • Care delivery and payment models such as Special Needs Plans or Direct Contracting Entities or SNF-At-Home gaining interest

How we can help

Approaches like PACE and other risk-based models offer emerging opportunities to consider. Our senior living professionals have deep knowledge of the clinical, financial, and operational components of the long-term and elderly care industry, and can help you identify value and potential within your organization and build a strategic path to a viable future.

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