While the ongoing pandemic has impacted all Americans, Covid has been most detrimental to the elderly and people with disabilities, many of whom depend on long-term services and supports (LTSS). This has
placed greater emphasis on alternative care models that allow elderly Americans with
LTSS needs to live at home, where a vast majority of this population prefers to receive
care. Today, more than 800,000 people are on waitlists to receive home and community-based services. This transition of care to the home is a theme that has become prevalent during Covid and warrants attention going forward.
Additionally, value-based care has emerged as a fixture of the healthcare landscape.
More than a trend, this secular theme has brought with it a proliferation of new
companies. While value-based care has different meanings depending on application,
the core concept is that all stakeholders win. Members receive better care, payers see
cost savings and providers are less encumbered with administrative work, allowing them
to be more engaged with members. Value-based care underscores the concept that the
best outcomes are achieved when all stakeholders are aligned.
One of these models that inherently encompasses value-based care AND offers an
alternative LTSS model that is home and community-based is the Program of All-Inclusive Care for the Elderly (“PACE”). PACE is a fully integrated, highly coordinated
care model that provides comprehensive medical and social services to frail, medically
complex, elderly individuals, most of whom are dually eligible for Medicare and Medicaid
benefits. PACE addresses the social determinants of health – transportation, meals, and
social isolation, to name a few. 95% of PACE participants live safely in the community.
PACE is a fully capitated model, which allows providers to deliver all services
participants need, rather than limit them to those reimbursable under Medicare and
Medicaid fee-for-service plans.
PACE produces tangible outcomes for all stakeholders:
Members experience reduced hospital admissions, decreased rehospitalizations,
reduced ER visits, fewer nursing home admissions and better preventive care;
States pay PACE programs 13% less than the cost of other Medicaid services;
Seniors receive better quality outcomes and can remain living in their communities; and importantly
97.5% of family caregivers would recommend PACE to someone in a similar situation.
The PACE model is roughly 50 years old, and in recent years enrollment has grown at a healthy 9% CAGR. Yet, while there are approximately 58,000 PACE participants, there are ~2 million Americans that could qualify, representing a penetration rate of just 3%. This is low. There are many reasons for this: regulation and policy challenges, limited access to the program, lack of awareness of the program by seniors, and capital-intensity to develop.
In Cain Brothers’ view, as we look to emerge from this pandemic, PACE is well positioned for an acceleration. There are a number of factors we have been watching that support this:
The current administration is pushing to expand home and community-based services. In April 2021, Senator Bob Casey (D-PA), Chairman of the Special Committee on Aging, introduced the PACE Plus Act that would strengthen and expand access to the PACE program;
The existing PACE landscape remains very fragmented and many players would benefit from scale and
Over the last few years, more private investment has come into the sector, which should help to fuel growth and expansion; and
More state Medicaid programs are planning for or are in the process of (most recently, DC and Illinois) developing and expanding PACE programs creating an opportunity for new entrants.
How might the PACE landscape change over the next few years? We could see consolidation of current players, new entrants, or partnerships between not-for-profits and for-profits. Whatever the form, PACE clearly benefits all stakeholders. The pandemic has cast a light on this value proposition and carved a path for adoption to meaningfully accelerate.